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OPTION 1 (29-AUG-15)

ANNUAL REPORT
2015

GATRON (INDUSTRIES) LIMITED


GATRON
GATRON

Contents
04 Vision Parent Company Presentation
05 Mission 06 Corporate Information
09 Notice of Annual General Meeting
13 Directors' Report
24 Focus on Sustainability
28 Financial Highlights
29 Graphical Presentation
30 Auditors' Review Report on Compliance of Code of Corporate Governance
31 Statement of Compliance with the Code of Corporate Governance
34 Auditors' Report to the Members
35 Balance Sheet
36 Profit and Loss Account
37 Statement of Comprehensive Income
38 Cash Flow Statement
39 Statement of Changes in Equity
40 Notes to the Financial Statements
73 Pattern of Shareholding
74 Detail of Pattern of Shareholding

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Annual Report of Gatron (Industries) Limited 2015

Consolidated Presentation
76 Directors' Report
77 Auditors' Report to the Members
78 Balance Sheet
79 Profit and Loss Account
80 Statement of Comprehensive Income
81 Cash Flow Statement
82 Statement of Changes in Equity
83 Notes to the Financial Statements

117 Withholding Tax on Dividend


118 Dividend Mandate Form

119 Form of Proxy

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GATRON

Vision
To remain at the forefront of quality,
innovation and cost competitiveness in the
Manufacturing and Marketing of Polyester
Filament Yarn, PET Preforms and other
Polyester related products.

To achieve corporate success while


achieving this vision.

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Annual Report of Gatron (Industries) Limited 2015

Mission
To achieve the stated vision of the company with
dynamism, business excellence with challenging spirit
and flexibility.
To serve the need of the customers by providing high
quality products as per their requirement and to their
ultimate satisfaction.
To be a good employer by creating a work
environment which motivates the employees and
promotes team work to encourage the employees
to pursue the fulfillment of the vision and mission
of the company.
To seek long term good relations with suppliers,
banks and financial institutions with fair and
honest dealings.
To play our role as a good corporate citizen
through socially responsible behaviour and
through service of the community where
we do business.
To achieve the basic aim of benefiting
shareholders and stake-holders while
adhering to the above vision and
mission.

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GATRON

Corporate Information

Board of Directors

Haji Haroon Bilwani - Chairman


Peer Mohammad Diwan - Chief Executive
Abdul Razak Diwan
Zakaria Bilwani
Usman Bilwani
Iqbal Bilwani
Shabbir Diwan
Muhammad Taufiq Bilwani
Muhammad Waseem

Audit Committee Members

Iqbal Bilwani - Chairman


Haji Haroon Bilwani
Usman Bilwani
Muhammad Waseem

HR & Remuneration Committee Members

Usman Bilwani - Chairman


Iqbal Bilwani
Shabbir Diwan
Muhammad Waseem

Chief Financial Officer

Rizwan Diwan

Company Secretary

Mohammad Yasin Bilwani

Auditors

M/s. Kreston Hyder Bhimji & Company


Chartered Accountants
Karachi.

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Annual Report of Gatron (Industries) Limited 2015

Legal Advisor Plant

Naeem Ahmed Khan Plot No.441/49-M2, Sector "M",


Advocates H.I.T.E., Main R.C.D. Highway,
Quetta. Hub Chowki, Distt Lasbela,
Balochistan, Pakistan.
Share Registrar
Registered Office
C&K Management Associates (Private) Limited
Room No. 404, Trade Tower, Room No.32, First Floor,
Abdullah Haroon Road, Ahmed Complex,
Near Metropole Hotel, Jinnah Road, Quetta - Pakistan.
Karachi-75530 - Pakistan.
Phone: 021-35687839, 35685930 Liaison/Correspondence Office

Bankers 11th Floor, G&T Tower,


# 18 Beaumont Road,
Bank Alfalah Limited Civil Lines-10,
Bank Al-Habib Limited Karachi-75530 - Pakistan.
Citibank N.A Phone: 021-35659500-9
Dubai Islamic Bank Pakistan Limited Fax: 021-35659516
Faysal Bank Limited
Habib Bank Limited Email
Habib Metropolitan Bank Limited
JS Bank Limited headoffice@gatron.com
MCB Bank Limited
Meezan Bank Limited Website
National Bank of Pakistan
NIB Bank Limited www.gatron.com
Samba Bank Limited
Standard Chartered Bank (Pakistan) Limited
United Bank Limited

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GATRON

NOTICE OF
ANNUAL GENERAL MEETING
Annual Report of Gatron (Industries) Limited 2015

Notice of Annual General Meeting

Notice is hereby given that the Thirty-fifth Annual General Meeting of Gatron
(Industries) Limited will be held on Monday, October 19, 2015 at 11:00 a.m., at Serena
Hotel, Quetta to transact the following business:

Ordinary Business:

1. To confirm the minutes of the Thirty-fourth Annual General Meeting and Extraordinary
General Meeting of the company held on October 20, 2014 and December 22, 2014
respectively.

2. To receive, consider and adopt the audited accounts of the company for the year ended
June 30, 2015 together with the Auditors' Report thereon and Directors' Report for the
year then ended.

3. To approve payment of final cash dividend at Rs.1.50 per share (15%) as recommended by
the Board of Directors and also interim cash dividend at Rs.2.00 per share (20%) already
paid, making a total Rs.3.50 per share (35%) for the year ended June 30, 2015.

4. To appoint company's auditors for the year ending June 30, 2016 and fix their remuneration.

Special Business:

5. To consider and if thought fit, to pass with or without modification, the following resolution
as a special resolution for clarification of Article 75 and the alteration to be made in the
Articles of Association of the company for the said purpose.

"Resolved that Article No. 75 of the Articles of Association of the company be and is hereby
altered to read as under:

Article 75. The qualification of a Director, shall be his holding shares of the face value of
Rs. 5,000/- (Rupees five thousand only) at least, in his own name, provided that Directors
representing interest holding the shares of the requisite value need not themselves hold the
qualification shares."

6. To transact any other ordinary business with the permission of the Chair.

By Order of the Board

Mohammad Yasin Bilwani


Company Secretary
September 12, 2015

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GATRON

Notes:

1. The Share Transfer Books of the company will remain closed from October 10, 2015 to
October 19, 2015 (both days inclusive). Transfers received in order at the office of the Share
Registrar before the close of business on October 09, 2015 will be considered in time for the
purpose of entitlement of final cash dividend.

2. A member entitled to attend and vote at the meeting may appoint another member as his/her
proxy to attend, speak and vote on his/her behalf. Proxies in order to be effective must be
received at the office of the company not less than 48 hours before the time of holding the
meeting. Proxy form is annexed.

3. A member, who has deposited his/her shares in Central Depository Company of Pakistan
Limited, must bring his/her Participant ID number and account/sub account number along
with original Computerized National Identity Card (CNIC) or original Passport at the time of
attending the meeting.

4. In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen
signature of the nominee shall be produced at the time of attending the meeting.

5. The company has withheld 1st interim dividend warrants of those members who have not yet
submitted CNIC and NTN to the company are once again requested to submit the same without
further delay.

It may kindly be noted that in case of non-receipt of above mentioned documents the company
would be constrained to withhold despatch of final cash dividend subject to the approval of the
SECP.

6. The Government of Pakistan, through Finance Act, 2015 has made certain amendments in
Section 150 of the Income Tax Ordinance, 2001 whereby different rates are prescribed w.e.f. 1st
July, 2015 for deduction of withholding tax on the amount of dividend paid by the companies.
These tax rates are as under:

a) for Filers of Income Tax return 12.50%.


b) for Non-filers of Income Tax return 17.50%.

To enable to make tax deduction on the amount of dividend @12.50% instead of 17.50% all the
shareholders whose names are not entered in the Active Taxpayer List (ATL) provided on the
website of Federal Board of Revenue (FBR), despite the fact that they are filers, are advised to
make sure that their names are entered into ATL.

The company will check each shareholder's status on the latest ATL available on 19th day of
October, 2015 at the FBR website and, if the shareholder whose name does not appear on the
ATL, the increased rate of withholding tax at 17.50% would be applied. In case of 'filer',
withholding tax rate of 12.50% will be applicable.

In case of joint account, each holder is to be treated individually as either a filer or non-filer and
tax will be deducted on the basis of shareholding of each joint holder as may be notified by the
shareholders, in writing, to our Share Registrar. In case no written information received by the
company latest by October 19, 2015, each joint holder shall be assumed to have an equal number
of shares. (Relevant Form is annexed for compliance).

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Annual Report of Gatron (Industries) Limited 2015

7. Shareholders, who desire to receive their dividend directly in their bank accounts instead of
receiving the dividend warrants physically may submit the prescribed "Dividend Mandate Form"
to the company's Share Registrar. The Shareholders who hold shares in Central Depository
Company may approach to submit the information to the CDC for this option. Mandate form
is annexed.

8. The shareholders are advised to notify to the company's Share Registrar of any change in their
addresses.

Statement Under Section 160(1)(b) of the


Companies Ordinance, 1984

The special resolution is proposed in order to clarify Article 75 of the Articles of Association
with regard to the value of qualification shares. The clarification is in accordance with the practice
followed by the Company so far and will also avoid any ambiguity with regard to its interpretation.

The Board recommends the special resolution set out at item No. 5 of the notice for approval
by the members.

The Directors of the company have no direct or indirect interest in the special business except
to the extent of their shareholding and remuneration.

A copy of the Memorandum and Articles of Association of the company will remain open for
inspection of the members who may visit office of the company on working days between 10:30
am to 12:30 pm for inspection from the date of publication of this notice till the conclusion of
the Annual General Meeting.

Comparative statement

Existing Article Proposed Alteration

Existing Article 75 Proposed Article 75


Qualification of a Director Qualification of a Director

The qualification of a Director, shall be his The qualification of a Director, shall be his
holding shares of the value of Rs.5,000/- holding shares of the face value of Rs.5,000/-
(Rupees five thousand only) at least, in his (Rupees five thousand only) at least, in his
own name, provided that Directors own name, provided that Directors
representing interest holding the shares of the representing interest holding the shares of the
requisite value need not themselves hold the requisite value need not themselves hold the
qualification shares. qualification shares.

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GATRON
Annual Report of Gatron (Industries) Limited 2015

Report Of The Board Of Directors

Dear Shareholders,

The Directors of your company are pleased to present


the annual report together with the audited financial
statements of the company for the year ended June
30, 2015.

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GATRON

Directors Report

The financial synopsis for the period under review is as below:

l Net sales Rs. 10,275 million,


l Operating loss Rs. 451 million,
l Financial charges Rs. 105 million,
l Investment income Rs. 616 million,
l Net Profit before income tax Rs. 60 million,
l Net Profit after income tax Rs. 89 million,
l Earnings per share Rs. 2.32

FINANCIAL REVIEW

The net sales in monetary terms decreased by Rs.1,489 million over the corresponding period
to reach Rs. 10,275 million for the year. Sales amount and consequently production volume was
down due to a combination of factors. The major factors were decline in unit value of raw
material and products in polyester chain, availability of cheaper imported Yarn and dumped
under invoiced fabric, increasing local energy and local manufacturing costs (making local
production uncompetitive), slowdown of economic activity at the start of the year in the backdrop
of political disruptions.

This year was unprecedented as far as volatility in the feedstock market was concerned. With
Crude Oil losing more than half of its value during November'14 to January'15, downstream
petrochemical products, (including those in the Polyester chain) saw their values drop by record
levels. This significant drop first led to losses on inventory held by the company. A further loss
was generated during November 14 to January 15 period where the raw material imported in
November 14 once converted to manufactured goods and sold, fetched a lower price reflecting
the reduced raw material prices at the time of sale. A partial increase in the international raw
materials and product prices in the March 15 to June 15 period, mitigated some portion of this
loss. However, in July 15/August 15 the international raw materials and product prices again
dropped.

Increase of 20% in the minimum wage level, (from Rs. 10,000 to Rs. 12,000) and the resultant
increase in wages across the board, significant rise in Gas cost on account of GIDC, rising costs
of numerous other manufacturing overheads (including water cost due to shortage of water)
were other negative factors affecting profitability. Energy and Wages form 50 to 70% of the
conversion cost of various products of your company. The rise in these costs by the actions of
the government and consequent rise in total conversion cost is drastically more than that in other
competing countries. With the PKR/USD parity not devaluing by a matching level over the last
four years, the cost of conversion per unit of product in dollar terms has risen dramatically, more
than those of foreign producers. It is slowly creeping to a level where, it is becoming challenging
to remain competitive against the foreign producers/suppliers (imports) on a continuous basis.
Further, to make matters more challenging the world oversupply in Filament Yarn is forcing
the international spreads (of price over raw materials) to fall extremely at low level and promoting
dumping into Pakistan.

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Annual Report of Gatron (Industries) Limited 2015

All the above factors have resulted in the worst yearly operating result (i.e a yearly loss of
Rs. 556 million). If the company had long term loans to finance its fixed assets, the results would
have been even worse. The government may be adopting a short term vision in balancing its
accounts by increasing energy prices. But without any corresponding relief or additional duty
protection (or for that matter devaluation which if done would prevent cost increase in dollar
terms), it is putting the balance sheets of the employment generating/import substitution units
in a difficult position and of course preventing further investment in such units. This does not
bear well for the country in future and shows absence of low priority about long term vision or
real growth/employment.

Amongst the balance sheet items, stocks increased by Rs. 195 million to Rs. 2,510 million, debtors
declined by Rs. 321 million to Rs. 768 million and creditors increased by Rs. 604 million. Dividend
received from associate investment provided a much needed breather, and helped the company
stay in green during the course of the year.

CAPITAL EXPENDITURES

l Major upgrading projects in the preceding year were carried out in the Spinning and
Texturizing Departments of the company. The Phase-I the Retrofit project of latest and
auto change "Wings" Winders in the existing spinning lines of 1984 & 1993 was successfully
completed in 2014. Now the Phase-II, bigger scale Retrofit to replace the old winders in the
70% of the pre-1995 existing spinning lines is expected to be completed in November 15.
The WINGS project not only improves the quality of Garton's final texturized yarn product
but also brings with it a reduction in power consumption and waste in the production
process along with replacing winders which are obsolete in terms of spare parts availability.

The oldest texturizing machines of year 1983 and 1985 have been replaced with the latest
version machines. Six brand new eFK machines of Oerlikon Barmag have been put in
production in 2014, while 4 similar version 2011 year machines will be put in production
by December 15.

In addition to replacing old inefficient machinery, machine electronic modification projects


are also being carried out for power saving and to resolve obsolescence problems as well as
to reduce production wastage.

l To overcome shortage of water supply from Hub Dam, two water RO plants have been
installed in the outgoing year, which were ordered last year. This will allow more water
from underground well sources for the production process as well as re- use of cooling tower
bleed off water and consequentially cost saving particularly in water shortage times.

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GATRON

CHALLENGES FACED AND FUTURE OUTLOOK

l Large expansions of Polyester Filament Yarn capacities in China coupled with lax control
on import and smuggling of yarn and fabric are likely to keep pressure on the operating
results of the company. The Chinese Filament Yarn producers supply yarn on CFR basis
at ridiculously low levels of spread over raw material, which hardly cover the auxiliary
material/packing and power cost that your company in Pakistan incurs. Therefore the
import duty along with landing charges on Filament Yarn is the very thin wall of protection
against the blizzard of imports. As noted above the situation is compounded by Government
actions of increasing energy and labour costs at 15 to 20% per year, which transform into
nearly 15% increase in dollar terms, versus perhaps 2 to 3% cost increase in other countries,
making the Pakistan industry more
uncompetitive against foreign suppliers. In view
of this as well as energy shortage in the country
(which hampers industrial growth) and the
limited fiscal space of Pakistan Government
versus other countries which give
subsidies/incentive, the Pakistan Government
has to be extremely careful in diluting the duty
protection by opening up the SAFTA low duty
trade with India, without necessary
safeguards/removal NTBs by India and also be
careful/judicious in expanding the FTA (Free
Trade Agreement = zero duty imports) with China as well as other countries.

l The demand of yarn in Pakistan is also affected by the smuggling of fabric from India &
China under Afghan Transit Trade and other routes. The Indian Government gives a rebate
of 12% on export of fabric from India, which is based on deemed duty basis which allows
the exporters of fabric from India to dispose the fabric via UAE to Pakistan at throw away
prices. Similarly the under-invoicing from China is quite evident from the fact that Pakistan
Custom figures for import from China are much lower than the export figures to Pakistan
as reported by China.

l The increase in the duty of PTA by 1% to 4% from July 14 without any proportional
increase in duty rate of our products has already diluted the protection level. Any further
reduction in the protection level, will have grave consequences on the industry.

l OGRA has again announced a Gas Tariff hike effective September 15, increasing industrial
and captive power tariffs by 23% and 5%, respectively. This is likely to increase costs by
Rs. 40 to 50 million a year. With additional pressure of GIDC, the rising power cost is at
the core of deteriorating financial position of Filament Yarn industry.

l The rising energy cost is making the cost of manufacturing of PET Resin (being used for
PET preforms) also challenging since the size of the said plant is 1/10th size of current new
plants in the world.

l At the start of the new fiscal year, the company had to take turndown in the production
due to rising stocks and unfavourable market conditions.

l Sindh Sales Taxes at reduced rates, such as on rent, legal and professional fees etc. being
inadmissible inputs will increase the cost of doing business.

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Annual Report of Gatron (Industries) Limited 2015

l The company is, of course still striving to implement cost saving projects by replacing old
machinery units, wherever possible and also controlling costs at various other points.

l In the budget FY15, Government has done away with mandatory payment of 10% of Output
Sales Tax, which is likely to help reduction in refund position of the company created by
mismatch of input tax on power/packing material vs output on finished goods.

l Reversal of past years excess provision of GIDC (on industrial consumers from July 2012
to May 2015, which will no more be payable) as discussed in note 24.1(c) of the financial
statements, helped to some extent in curtailing the loss.

OTHER MATTERS

The overall performance of 100% wholly owned subsidiary M/s. Gatro Power (Private) Limited
supplying power to the company remained average. The Board of Directors of M/s. Gatro Power
(Private) Limited has proposed for payment of final cash dividend of Rs.1.50 per share (15%) for
the year ended June 30, 2015. This is in addition to interim cash dividends of Rs. 12.00 per share
(120%) already paid, accumulating to a total dividend for the year of Rs. 13.50 per share (135%).

HUMAN RESOURCES DEVELOPMENT

The company has held in high esteem the best practices of Human Resources and relentlessly
strives to incorporate the same in all HR processes and systems. The company hires quality
human resource and then provides them the
opportunities and challenges that would drive them
to be their best. The company believes in enriching
its employees by providing them a work
environment that is not only conducive to learning,
but at the same time provides them with ample
room for innovation, a change to grow and develop
themselves into future leaders.

During the year, several initiatives have been taken


to enhance the competence of our people, including the establishment of state of art training
facility at our liaison office. The company arranges during the year in house training sessions
facilitated by internal HR department as well as from the other outsourced professionals on
different topics for employees to acquaint them about the recent global practices.

The company recognizes the importance of taking care of its employees because a happy employee
is a productive employee. Happiness at work lies at the core of HR values as this is one single
factor that contributes to good careers, happy lives and ultimately business success.

INFORMATION & COMMUNICATION TECHNOLOGY

Information & Communication Technology (ICT) is the key enabler seeking continuous
improvement in the business processes of the company with a high emphasis on leveraging
technology to gain business advantage. The governance of ICT is aimed at providing resilience
to internal and external challenges with a view to ensuring continuity of business operation at
all time.

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GATRON

During the period under review, migration of Oracle


database and application systems were carried out
to run on a newer platform to keep up pace with
technology and avoid obsolescence. Some applications
are although still in the process of migration. On
the communication side, continues monitoring of
Pakistan Telecommunication Authority (PTA)
prescribed radio frequency spectrum was ensured
to maintain compliance. Fiber optic network was
inducted and utilized alongside wireless Radio network
for balancing our digital data traffic load in order
to overcome tighter PTA bandwidth regulation. Consequently making it possible for us to ensure
continuity of business operation remotely with our factories and branch offices. Realizing the
global international trend towards Cloud computing coupled with the fast outburst of 3G and
4G mobile technologies in Pakistan, the company is geared-up to catch up with this trend, having
setup a private cloud by centralizing our core business operation within a data center at liaison
office and by virtue of that providing services to our various operations.

On the application systems' side some new applications were developed and some old ones were
revisited to further improve their visibility in order to have better control over our business
operation. Refresher training being integral to system compliance were also imparted to end users
to increase their confidence and ownership over company's systems and procedures.

RISK MANAGEMENT

The company has a risk management policy which can reduce the chances and consequences of
risks materializing. It also delivers benefits when it comes to making strategic decisions and helps
increase overall efficiency.

Our risk management strategy provides a structured approach


in identifying risks and ensuring that they are within acceptable
limits at all times. By assessing risks the company is able to take
precautionary measures to handle uncertain events. Not only
that, but it also helps identify steps that can be taken to protect
the company, people and assets concerned.

The company recognizes the importance of insuring assets against


unforeseen circumstances and is confident that all major risks
as well as production loss due to these are well covered. This is
part of company's business continuity, planning and also includes
efforts to minimize time to recover from natural as well as man-made disasters.

HEALTH, SAFETY & ENVIRONMENT

The company is well aware about the important assets of the company, specially for its staff and
workforce therefore, established Health, Safety & Environment (HSE) department, which is led
by qualified and certified Team Leaders. HSE department is very clear with its objectives in fact,
identifying the unsafe areas and following on daily basis for reducing the incidents by controlling
the unsafe and unhealthy work practices and conditions at work places.

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Annual Report of Gatron (Industries) Limited 2015

The Safety Operation Committee consisting of Senior Management has been formed for this
purpose, which conducts meetings periodically.

HSE representatives as per proactive approach,


identification of fire and safety hazards by risk
assessment surveys carry out regularly for the
reduction of work place hazards as well as incidents
and accidents. HSE also conduct incidents statistic
gap analysis as well as follow up for corrective /
preventive safety measures to reduce accidents.

In addition, Comprehensive Occupational Health


and Safety Training Sessions including practical fire fighting and mock evacuation drills are
conducted for all employees and its workforce for an organized evacuation in case of any
emergency.

The company having equipped fire tender with


dedicated fire and safety staff in each shift, in
addition, an Emergency Response Team (ERT
Team) is formed in all shifts, which may respond
in case of any emergency for example fire
emergency, oil spillage emergency, rain emergency,
earth quake emergency etc. The company also keeps
adequate stock of firefighting equipments for front
line fire fighters.

The company recognizes the importance of a healthy work force and safe workplaces as well as
Property Protection by developing with a hazards free and peaceful environment as well as
maintaining Fire and Safety Equipment on site with dedicated staff, to ensure effectiveness.

In addition, First Aid Services is being provided on site to all employees as well contractor
workforce and in serious condition mobilization by Ambulance to hospital as well as medical
measures are being taken.

CORPORATE GOVERNANCE

Our Governance strategy is to ensure that the company follows the direction defined by its core
values, current regulatory framework and global best practices. The Board, discharges its
responsibilities as defined in the "Code of Corporate Governance", by Karachi Stock Exchange
Ltd. and the "Corporate Financial Reporting Framework" by Securities & Exchange Commission
of Pakistan. Our approach towards corporate governance ensures ethical behaviour, transparency,
accountability in all that we do and to attain a fair value for the shareholders.

The Board meets at least once after every quarter to review the financial performance and to
provide oversight to the management to achieve key performance indicators. All the Board
members are given appropriate documentation in advance of each meeting, which normally
includes a detailed analysis of business and on matters, where the Board is required to make a
decision or give its approval.

The Board, always take active participation in discussions during the meetings to add value and
to provide strategic leadership to the company.

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GATRON

CORPORATE SOCIAL RESPONSIBILITY

The company since inception has consistently worked for the uplift of communities that are
influenced directly or indirectly by our business. The Corporate Social Responsibility (CSR)
program of the company is based on the principles of transparency, accountability, integrity and
sustainability. Community and stakeholder needs are carefully assessed and strategic support is
extended in line with the company's policies and business objectives. The company takes its
responsibilities to the society seriously.

Our CSR program is focused on health-care, education, environment and infrastructure. The
initiatives undertaking seek to ensure that there is a clear value addition and that the real impact
is made at the grassroots level.

WINDING UP OF SUBSIDIARY COMPANY

Activities for voluntary winding up of GT Universal Limited, a wholly owned subsidiary


completed and now said subsidiary stands dissolved.

DIVIDEND DISTRIBUTION

The Board of Directors take pleasure to recommend


to the shareholders of the company for approval
in the ensuing Annual General Meeting, a final
cash dividend at Rs.1.50 per share (15%) which will
be paid to those shareholders whose names will
appear on the members' register on the date as
mentioned in the notice of AGM.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments affecting the financial position of the company occurred
during the period to which the balance sheet relates and the date of this report.

AUDITORS

The existing external Auditors, M/s. Kreston Hyder Bhimji & Co., Chartered Accountants, retire
at the conclusion of the Thirty-fifth Annual General Meeting. Being eligible, they have offered
themselves for re-appointment.

As suggested by the Audit Committee, the Board recommends the appointment of M/s. Kreston
Hyder Bhimji & Co., Chartered Accountants as Auditors of the company for the year ending
June 30, 2016.

The Auditors of the company M/s. Kreston Hyder Bhimji & Co., Chartered Accountants, have
issued an unqualified review report to the members of the company. As regard to the emphasis
paragraph of the Auditors' Report, the detailed explanations have already been given in
Note 24.1(a) of the financial statements for the year ended June 30, 2015.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of the Group along with notes thereto and auditors' report
thereon, have also been included in this annual report.

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Annual Report of Gatron (Industries) Limited 2015

STATEMENT ON CORPORATE AND FINANCIAL REPORTING FRAMEWORK

l The financial statements for the year ended June 30, 2015 prepared by the management of
the company, present its state of affairs fairly, the result of its operations, cash flows and
changes in equity;

l Proper books of accounts have been maintained by the company;

l Appropriate accounting policies have been consistently applied in preparation of financial


statements and accounting estimates are based on reasonable and prudent judgments;

l International Financial Reporting Standards, as applicable in Pakistan, have been followed


in preparation of financial statements and any departure therefrom has been adequately
disclosed;

l The system of internal control is sound in design and has been effectively implemented and
monitored;

l Significant deviations from last year in operating results of the company are disclosed in this
report;

l There are no significant doubts upon the company's ability to continue as a going concern;

l There has been no material departure from the best practices of corporate governance, as
detailed in the listing regulations;

l During the year, the directors, including CFO, Company Secretary and their spouses and
minor children have not traded in the shares of the company;

l Key operating and financial data of last six years in summarized form is annexed;

l The fair value of the provident funds investments as at June 30, 2015 was Rs. 363.170 million;

l During the year 05 Board meetings, 04 Audit committee meetings and 03 HR & Remuneration
committee meetings were held. Attendance by each director / member were as follows:

Board of Directors Number of meetings attended

Haji Haroon Bilwani 5


Mr. Peer Mohammad Diwan 5
Mr. Abdul Razak Diwan 4
Mr. Zakaria Bilwani 5
Mr. Usman Bilwani 5
Mr. Iqbal Bilwani 5
Mr. Shabbir Diwan 4
Mr. Muhammad Taufiq Bilwani 4
Mr. Muhammad Waseem 3*

*(newly elected director in the EOGM of the company held on 22/12/2014)


Leaves of absence were granted to the directors for not attending the Board meetings.

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GATRON

Audit Committee Number of meetings attended

Mr. Iqbal Bilwani 3


Haji Haroon Bilwani 4
Mr. Zakaria Bilwani 2*
Mr. Usman Bilwani 4
Mr. Muhammad Waseem 2**

*(ceased from 05-01-2015)


**(appointed from 05-01-2015)

HR & Remuneration Committee Number of meetings attended

Mr. Usman Bilwani 3


Mr. Iqbal Bilwani 3
Mr. Shabbir Diwan 3
Muhammad Waseem 2*

*(appointed from 05-01-2015)

PATTERN OF SHAREHOLDING

A statement showing pattern of shareholding of the company and additional information as at


June 30, 2015 is annexed.

BOARD OF DIRECTORS

The new Board of Directors was elected for the next term of three years in the Extra Ordinary
General Meeting of the company held on December 22, 2014. Subsequently, the Board re-
appointed Mr. Peer Mohammad Diwan as Chief Executive and Haji Haroon Bilwani as Chairman
of the company for a term of three years. The remunerations of the full time working directors,
chief executive and chairman were also fixed by the Board.

The above information has already been disseminated to the shareholders of the
company under Section 218 of the Companies Ordinance, 1984.

EVALUATION OF BOARD OWN PERFORMANCE

As stated in the Annual Report of 2014 that the Board of Directors has already set the mechanism
for evaluation of its own performance as per requirement of the Code of Corporate Governance.
The new Board of Directors (elected in the Extra Ordinary General Meeting held on December
22, 2014) will evaluate its own annual performance by the end of December, 2015. The approved
mechanism has been circulated to all the directors of the company for their inputs and to determine
whether the Board and its Committees are functioning effectively.

COMPLIANCE WITH BEST PRACTICES OF CORPORATE GOVERNANCE

A statement showing the status of compliance with the best practices of the Corporate Governance
set out in the Code of Corporate Governance 2012 is being published and circulated along with
this report.

Page 22
Annual Report of Gatron (Industries) Limited 2015

DELIVERY OF UNCLAIMED SHARES/UNCLAIMED DIVIDENDS

Members of the company are once again requested to contact the office of the company or the
company's Share Registrar for collection of their shares/dividends which they have not yet
received due to any reasons.

ACKNOWLEDGMENT

The Board is fully appreciative of the dedication and commitment of its all employees and would
like to thank them for their valuable contributions in producing sustainable growth in a highly
competitive economic condition. The Board also acknowledges and wishes to thank all its valuable
customers and other stakeholders for their continued support and loyalty to the company.

On behalf of the Board

Peer Mohammad Diwan


Chief Executive
September 12, 2015

Page 23
GATRON

Focus on Sustainability

With our diversed portfolio of polyester products which are indirectly affect a large segment of
society and this is a responsibility we take very seriously. Sustainability is therefore integrated
into our practices, processes and the products we offer.

Sustainability Strategy

Step-by-step efforts on a daily basis over many years are required to achieve business sustainability.
It is a marathon, not a sprint. That's how we see sustainability at Gatron and how we approach
it.

It is clearer than ever that, sustainability remains a topic of vital concern to the company. Most
of our efforts are FOCUSED on "efficiency" and "productivity" - broad terms that often signal
the goal of reducing energy, water, material usage and are therefore at the HEART of the
sustainability in particular conditions of manufacturing industry.

For creating a more sustainable relationship with polyester a new dexterity is required. At Gatron,
we are upgrading our production lines with latest state of the art machinery that provides us
greater productivity and efficiency.

Sustainability Framework

We follow the same as depicted in this picture to strive


to achieve business sustainability.

The company has adapted the subsequent approaches


for each of the above mentioned performance categories:

Social Performance with Stakeholders

Employment practices

Safety, health and prosperity of our employees and communities is both a business and personal
value. As a responsible company we are developing and empowering our employees and people
from the communities that surround us.

We practice and endorse equal opportunity employment, ensure compliance with human rights
initiatives and adhere to employee safety & labor laws. We have implemented policies that counter
corruption and fraudulent activities.

To attract, retain and bring out the best in its people, we invest in leadership and development
training and offer rewarding careers where employees are able to continuously learn and grow.

Community investment

Through Gatron Foundation (a charitable institution) we manage our community investment


activities in health and education sectors.

Page 24
Annual Report of Gatron (Industries) Limited 2015

We contribute to communities in which we operate to build a prosperous, educated and healthy


Pakistan. Our approach is to ensure:

l Health support;
l Education support;
l Employment generation;
l Infrastructure development;

During the year the company has made donations amounting to Rs. 14.442 million which includes
the following:

(1) Donation of Rs. 10.850 million to Gatron Foundation (related party). The company through
the Gatron Foundation contributed towards health related activities specially eye disease
treatment for under previleged members of the society, flood relief activities and provided
food and water to flood hit areas and distributed ration to chitral flood victims.

(2) Donation of Rs. 3.592 millions to various organization and distribution of ration to the
poor and needy persons of the vicinity.

Government services

We are working with the Government at local and national levels, adhering to laws and regulations
in every field of our business. Our approach is based on:

l Compliance with laws and regulations;


l Adherence to corporate governance guidelines;
l Contribution towards direct and indirect taxation;

Health, Safety & Security

Zero harm in terms of health, safety and security in our workplaces remains our underlined
philosophy of conducting sustainable business.

Man and material safety and security is ensured by assessing each new incident and near miss by
defining appropriate controls, reviewing and
monitoring assessments and taking appropriate
measures to avoid incidents in the future. Safety
and evacution drills, both planned and surprised
are held regularly.

Our work permit system ensures proper isolation


of equipment / site, safe execution of works and
hand over - take over between departments.

Our Customers & Suppliers

We are working actively with suppliers and customers to reduce packing and transportation cost.
This is done through changes in packing sizes and bulk container shipments.

Through corrective actions at the plant and follow up by the sales department, customer complaints
are addressed to ensure our customers are provided with the best value products and services.

Page 25
GATRON

To develop business sustainability with our suppliers we are providing regular orders, timely
payments, recognition & feedback, performance evaluation and long term association.

Our Company regularly conducts technical evaluations of its vendors and contractors in order
to rationalize its operations in a more efficient and effective manner.

Environmental Performance

In line with the global charters on sustainable development and our


internal environmental management systems, we aim to reduce impact
of our operations on the environment. We achieve this by practicing
the Principle of 4 Rs (Reduce, Reuse, Recycle and Responsible disposal).

We maximize our resource utilization by recovering and re-using most of our non-product
outputs, reducing our requirement for fresh materials. Re-use of paper tubes, cartons, chips
bagging materials and wooden cases and printing papers is being done to minimize consumption.
The waste generated, is either recycled within the plant or disposed off in an environment friendly
way. Water conservation and reduction in effluents is ensured by recycling water from various
streams for horticulture purposes. We take adequate safety measures and strive to avoid significant
spills by monitoring our production sites. This year, we had no significant spills or leaks.

Compliance with environmental standards

At Gatron we are striving to reduce our carbon footprint and in that regards, our practices are
Eco-friendly and satisfy local as well as international Environmental standards. During the year
successful audits were conducted by the SGS certification body for ISO 9001, 14001 & HACCP,
ISO 22000 and PAS 223 certification.

OHSAS 18001 has been developed to be compatible with ISO 9001:2008 (Quality) and ISO
14001:2004 (Environmental) management systems standards in order to facilitate the integration
of quality, environmental, occupational health and safety management systems by organizations.

We are studying requirements for OHSAS 18001 certification and are targeting to be compliant
in the standard by the end of the next financial year.

Green Office Certification

The Green Office Certification program supports, promotes,


and recognizes offices that are engaged in sustainable practices GREEN
to protect environment. Gatron has attained WWF Green
Office Certification this year for its office premises based on OFFICE
A WWF INITIATIVE
the score achieved of Green Office criteria in the areas of TO REDUCE

conservation of Energy & Water use; reduction in use of Paper ECOLOGICAL


FOOTPRINT

& Printing; and Sustainable Planning to reduce the use of


transport by conducting video conference.

Reduction of carbon footprints and exhaust emissions from operations

We monitor our gaseous emissions (SOx, NOx & CO) and suspended particulate matter (SPM)
by appropriate analyzer TESTO 340, TESTO AG Germany as per regulatory norms.

Page 26
Annual Report of Gatron (Industries) Limited 2015

Implementing Green policies

Where possible, procurement of chemicals and laboratory reagents is done in separate drums
which are disposed off in an environment friendly manner.

We strive to develop SWAR - Sustainable Water Resource Management. Through technical


consultation we are improving water, energy and chemicals management at our production units.

Economic Performance

The approach of the management of Gatron is focused on ethics and responsible care in pursuit
of delivering long term business value to remain a partner of choice for our valued customers
and suppliers.

Our aim is to do business with partners who also share and endorse our ethical values. In that
regards, we carefully select suppliers whose standards meet our requirements. Furthermore, we
assist ours vendors in improving their quality by giving constructive feedback.

For evolving sustainability we are economizing production, enhancing quality control, and
up-grading equipment in order to improve market coverage.

We share our generated wealth with all stakeholders through adequate remuneration, rewards
and retirement benefits for staff and timely deposit of taxes / duties / levies.

We are assessing financial implications arising from changes in technology, threats from competitors
and environmental standards etc.

Economizing Utilities

For power saving several measures have been taken. Conventional outdoor lights, bulbs and tube
lights have been replaced with energy savers at the plant floor and working offices. Replacement
of hi-bay lights with LVD (Low Voltage Discharge Induction Light), and LED (Light Emitting
Diode) type of Flood lights and Street lights is being done.

Page 27
GATRON

Financial Highlights
Particulars 2014 2013 2012 2011 2010 2009
Operating Results

Pak Rupees in Thousands


Sales 11,763,699 11,348,105 11,199,270 10,780,531 8,620,045 7,497,075
Gross Profit 580,635 496,980 1,117,653 871,698 566,874 567,999
Operating Profit 55,601 22,015 645,017 553,148 295,505 264,323
Profit after taxation 145,756 321,603 652,820 626,444 410,975 379,320

Percentage
Dividend 55.00 40.00 95.00 50.00 20.00 15.00

Financial Position

Pak Rupees in Thousands


Paid up Capital 383,645 383,645 383,645 383,645 383,645 383,645
Reserves & unappropriated profit 3,393,211 3,508,016 3,359,053 3,123,345 2,573,630 2,220,202
Property, Plant & Equipment 1,797,791 1,719,259 1,860,764 2,047,881 2,357,159 2,429,297
Current Assets 4,394,362 4,690,308 3,725,008 3,713,325 2,671,278 3,102,234
Current Liabilities 2,614,420 2,393,858 1,675,047 2,013,047 1,603,698 2,396,989
Net Current Assets 1,779,942 2,296,450 2,049,961 1,700,278 1,067,580 705,245
Long Term Liabilities - - - 79,158 298,815 337,472
Deferred Liabilities 400,528 426,083 470,357 463,770 470,731 495,241

Financial Ratios & Percentages

Percentages
Gross Profit Ratio 4.94 4.38 9.98 8.09 6.58 7.58
Return on Capital Employed 4.31 5.92 23.28 22.49 14.24 16.26
Return on Equity 3.86 8.26 17.44 17.86 13.90 14.57

Number of Times
Inventory Turnover 4.51 4.53 4.94 5.96 4.81 3.77
Debtors Turnover 10.48 11.60 11.24 12.57 16.15 12.62
Total Assets Turnover 1.74 1.80 1.87 1.89 1.54 1.28
Fixed Assets Turnover 6.69 6.34 5.73 4.89 3.60 3.07
Interest Cover 0.46 0.25 31.36 8.53 1.71 1.03

Ratio
Debt-Equity 0 : 100 0 : 100 0 : 100 02 : 98 09 : 91 11 : 89
Current Ratio 1.68 : 1 1.96 : 1 2.22 : 1 1.84 : 1 1.67 : 1 1.29 : 1

Per Share Results and Returns

Pak Rupees
Break-up Value 98.45 101.44 97.56 91.41 77.08 67.87
Earnings per Share Basic and diluted 3.80 8.38 17.02 16.33 10.71 9.89
Dividend per Share 5.50 4.00 9.50 5.00 2.00 1.50

Percentages
Dividend Yield 3.24 2.34 10.17 9.51 4.76 2.48
Dividend Pay Out 144.74 47.73 55.82 30.62 18.67 15.17

Number of Times
Price Earning Ratio Year end price 44.74 20.41 5.49 3.22 3.92 6.12

Share Performance

Pak Rupees
Highest 200.37 201.00 95.78 58.80 77.00 81.72
Lowest 165.03 88.79 49.00 36.80 35.77 32.50
At year end 170.00 171.00 93.45 52.60 42.00 60.50

Page 28
Annual Report of Gatron (Industries) Limited 2015

Graphical Presentation

Sales Break up Value of Share

16000 110.00
101.44 98.45
100.00 97.56
91.41 95.04
14000
90.00
12000 11,199 11,348 11,764 77.08
80.00
(Pak Rupees in Million)

10,781 10,275
10000 70.00
8,620

(Rupees)
60.00
8000
50.00
6000 7,936 10,270 10,982 10,968 11,468 9,936 40.00
30.00
4000
20.00
2000 10.00
684 511 217 380 296 339
0 0.00
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Export Sales Local Sales

Shareholders' Equity Property, Plant And Equipment

4500 2500 2,357


4000 3,892
3,743 3,777 3,646 2,048
3,507 3,508 1,861 1,837
3,359 3,393 3,262 2000
(Pak Rupees in Million)

3500 1,798
3,123
(Pak Rupees in Million)

2,957 1,719
3000
2,573
1500
2500
2000
1000
1500
1000 500
500 384 384 384 384 384 384

0 0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Paid up Reserves & Shareholders'


Capital Un-App. Profit Equity

Page 29
Annual Report of Gatron (Industries) Limited 2015

Statement of Compliance with the


Code of Corporate Governance
Name of the Company: Gatron (Industries) Limited
Year Ended: June 30, 2015

This statement is being presented to comply with the Code of Corporate Governance (CCG)
contained in Clause No. 5.19 of the Rule Book of the Karachi Stock Exchange Limited for the
purpose of establishing a framework of good governance, whereby a listed company is managed
in compliance with the best practices of corporate governance.

The company has applied the principles contained in the CCG in the following manner:

1. The company encourages representation of independent non-executive directors and directors


representing minority interests on its board of directors. At present the board includes:

Category Names

Executive Directors Mr. Peer Mohammad Diwan, Chief Executive


Mr. Abdul Razak Diwan
Mr. Zakaria Bilwani
Mr. Shabbir Diwan
Mr. Muhammad Taufiq Bilwani

Non-Executive Directors Haji Haroon Bilwani, Chairman


Mr. Usman Bilwani
Mr. Iqbal Bilwani

Independent Director Mr. Muhammad Waseem

2. The directors have confirmed that none of them is serving as a director on more than seven
listed companies, including this company.

3. All the resident directors of the company are registered as taxpayers and none of them has
defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a
member of a stock exchange, has been declared as a defaulter by that stock exchange.

4. No casual vacancy occurred on the Board after the election of directors which was held on
December 22, 2014.

5. The company has prepared a "Code of Conduct" and has ensured that appropriate steps
have been taken to disseminate it throughout the company along with its supporting policies
and procedures.

Page 31
GATRON

6. The board has developed a vision/mission statement, overall corporate strategy and significant
policies of the company. A complete record of particulars of significant policies along with
the dates on which they were approved or amended has been maintained.

7. All the powers of the board have been duly exercised and decisions on material transactions,
including appointment and determination of remuneration and terms and conditions of
employment of the CEO, other executive(s) and non-executive directors, have been taken
by the board.

8. The meetings of the board were presided over by the Chairman and, in his absence, by a
director elected by the board for this purpose and the board met at least once in every quarter.
Written notices of the board meetings, along with agenda and working papers, were circulated
at least seven days before the meetings. The minutes of the meetings were appropriately
recorded and circulated.

9. In accordance with the criteria specified in clause 5.19.7 of Code of Corporate Governance
under Rule Book of Karachi Stock Exchange Limited all the re-elected Directors have been
provided with latest copies of Listing Regulations of the Stock Exchanges, Memorandum
and Articles of Association and the revised Code of Corporate Governance, 2012 after their
appointment in the Extraordinary General Meeting held on December 22, 2014. According
to the said clause seven Directors are exempted from Directors Training program while one
Director has completed training trough ICAP. One Director will get certification well before
time frame as per Code. The company acknowledges that majority of the Directors are well
conversant with their duties and responsibilities.

10. The board has already ratified appointments of CFO, Company Secretary and Head of
Internal Audit, including their remuneration and terms and conditions of employment.

11. The directors' report for this year has been prepared in compliance with the requirements
of the CCG and fully describes the salient matters required to be disclosed.

12. The financial statements of the company were duly endorsed by CEO and CFO before
approval of the board.

13. The directors, CEO and executives do not hold any interest in the shares of the company
other than that disclosed in the pattern of shareholding.

14. The company has complied with all the corporate and financial reporting requirements of
the CCG.

15. The board has formed an Audit Committee. It comprises four members, of whom three are
non-executive directors and one independent director. The Chairman of the committee is
a non-executive director.

16. The meetings of the audit committee were held at least once every quarter prior to approval
of interim and final results of the company as required by the CCG. The terms of reference
of the committee have been formed and advised to the committee for compliance.

17. The board has formed an HR and Remuneration Committee. It comprises four members,
of whom two are non-executive directors, one executive director and one is independent
director. The Chairman of the committee is a non-executive director.

Page 32
Annual Report of Gatron (Industries) Limited 2015

18. The board has set up an effective internal audit function and personnel involved are considered
suitable, qualified and experienced for the purpose and are conversant with the policies and
procedures of the company and they are involved in the internal audit function on full time
basis.

19. The statutory auditors of the company have confirmed that they have been given a satisfactory
rating under the quality control review program of the Institute of Chartered Accountants
of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor
children do not hold shares of the company and that the firm and all its partners are in
compliance with International Federation of Accountants (IFAC) guidelines on code of
ethics as adopted by the ICAP.

20. The statutory auditors or the persons associated with them have not been appointed to
provide other services except in accordance with the listing regulations and the auditors have
confirmed that they have observed IFAC guidelines in this regard.

21. The 'closed period', prior to the announcement of final result, and business decisions, which
may materially affect the market price of company's securities, was determined and intimated
to directors, employees and stock exchange(s).

22. The related party transactions have been placed before the Audit Committee and approved
by the Board of Directors.

23. Material/price sensitive information has been disseminated among all market participants
at once through stock exchange(s).

24. We confirm that all other material principles enshrined in the Code have been complied
with.

For and on behalf of the Board of Directors

Peer Mohammad Diwan


Chief Executive

September 12, 2015

Page 33
Annual Report of Gatron (Industries) Limited 2015

Balance Sheet
AS AT JUNE 30, 2015

(Pak Rupees in Thousand)


Notes 2015 2014
ASSETS
Non-current Assets

Property, plant and equipment 4 1,837,233 1,797,791


Long term investments 5 597,642 597,769
Long term loans 6 804 211
Long term deposits 7 1,669 1,671
2,437,348 2,397,442

Current Assets

Stores, spare parts and loose tools 8 447,100 494,777


Stock in trade 9 2,510,177 2,315,281
Trade debts 10 767,713 1,088,765
Loans and advances 11 43,384 36,668
Trade deposits and short term prepayments 12 3,482 15,248
Other receivables 13 187,191 239,448
Taxes refund due from Federal Government 14 195,413 100,204
Cash and bank balances 15 79,140 103,971
4,233,600 4,394,362
TOTAL ASSETS 6,670,948 6,791,804

EQUITY AND LIABILITIES


SHARE CAPITAL & RESERVES

Share capital 16 383,645 383,645


Capital reserves 17 458,645 458,645
General reserve 18 2,500,000 2,500,000
Unappropriated profit 303,700 434,566
3,645,990 3,776,856

LIABILITIES
Non-current Liabilities

Deferred liabilities 19 404,613 400,528

Current Liabilities

Trade and other payables 20 1,776,975 1,173,025


Accrued mark up 21 16,789 25,880
Short term borrowings 22 762,879 1,387,334
Provision for income tax less payments 23 63,702 28,181
2,620,345 2,614,420

CONTINGENCIES AND COMMITMENTS 24

TOTAL EQUITY AND LIABILITIES 6,670,948 6,791,804

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive
Conversion rates as at June 30, 2015 were 1 US$ = Rs. 101.70, 1 Euro = Rs. 113.79 and 1 Pound = Rs. 159.91

Page 35
GATRON

Profit And Loss Account


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


Notes 2015 2014

Sales 25 10,275,281 11,763,699


Cost of sales 26 10,239,016 11,183,064
Gross profit 36,265 580,635
Distribution and selling expenses 27 234,300 238,248
Administrative expenses 28 268,100 236,541
Other operating expenses 29 44,039 64,548
546,439 539,337
(510,174) 41,298
Other income 30 58,828 14,303
Operating (loss) / profit (451,346) 55,601
Finance cost 31 104,904 118,547
(556,250) (62,946)
Investment income - Dividend 32 616,350 225,750
Profit before income tax 60,100 162,804
Income tax - Current and Prior 29,941 74,285
Deferred (58,752) (57,237)
33 (28,811) 17,048
Profit after income tax 88,911 145,756

Earnings per share - Basic and diluted ( Rupees ) 34 2.32 3.80

(1) The Board of Directors has recommended final cash dividend for the year ended
June 30, 2015 of Rs.1.50 per share (i.e.15%). This is in addition to interim cash dividend of Rs.2.00
per share (i.e. 20%) refer note 43.

(2) The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 36
Annual Report of Gatron (Industries) Limited 2015

Statement Of Comprehensive Income


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


2015 2014

Profit after income tax 88,911 145,756

Other comprehensive income

Items that will never be reclassified to profit or loss


Remeasurement of defined benefit liability having nil tax impact (27,955) (11,192)

Total comprehensive income 60,956 134,564

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 37
GATRON

Cash Flow Statement


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


Notes 2015 2014
Cash Flow from / (towards) Operating Activities
Profit before income tax 60,100 162,804
Adjustments for:
Depreciation 294,187 273,941
Provision for defined benefit plan 40,561 25,073
Gain on disposal of property, plant and equipment (4,645) (8,557)
Loss on disposal of property, plant and equipment 102 99
Impairment in long term investments 115 73
Provision for doubtful trade debts-net 8,099 36,129
Provision for slow moving stores, spare parts
and loose tools-net 11,092 2,436
Reversal of provision for Gas Infrastructure
Development Cess (25,444) -
Dividend income (616,350) (225,750)
Finance cost 104,904 118,547
(187,379) 221,991
(127,279) 384,795
Decrease / (increase) in current assets:
Stores, spare parts and loose tools 36,585 (70,362)
Stock in trade (194,896) 329,504
Trade debts 312,953 30,795
Loans and advances (3,731) 6,433
Trade deposits and short term prepayments 11,766 610
Other receivables 52,257 6,765
Taxes refund due from Federal Government (16,320) 10,356
198,614 314,101
Increase / (decrease) in Trade and other payables 598,847 (267,400)
Cash flow from operations 670,182 431,496

(Payments for) / receipts of:


Long term loans (3,578) 569
Long term deposits 2 (420)
Defined benefit plan (5,679) (4,583)
Finance cost (113,995) (112,432)
Income tax (73,309) (51,889)
Net cash flow from operating activities 473,623 262,741

Cash Flow from / (towards) Investing Activities


Additions in property, plant and equipment (338,265) (364,691)
Proceeds from disposal of property, plant and equipment 9,206 20,731
Decrease / (increase) in long term investments 12 (297,210)
Dividend received 616,350 225,750
Net cash flow from / (towards) investing activities 287,303 (415,420)

Cash Flow (towards) / from Financing Activities


Dividend paid (161,302) (248,225)
Net cash flow towards financing activities (161,302) (248,225)
Net increase / (decrease) in cash and cash equivalents 599,624 (400,904)
Cash and cash equivalents at the beginning (1,283,363) (882,459)
Cash and cash equivalents at the end 35 (683,739) (1,283,363)

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 38
Annual Report of Gatron (Industries) Limited 2015

Statement Of Changes In Equity


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


Capital Reserves
Share Share General Unappropriated Total
Sub
Capital Premium Others Total reserve profit

Balances as at July 01, 2013 383,645 383,645 75,000 458,645 2,500,000 549,371 3,891,661

Total comprehensive income


for the year ended June 30, 2014 - - - - - 134,564 134,564

Transactions with owners

Final cash dividend for the year


ended June 30, 2013 at Rs. 4.00
per share i.e. @40% - - - - - (153,458) (153,458)

Interim cash dividend for the


year ended June 30, 2014 at
Rs.2.50 per share i.e. @25% - - - - - (95,911) (95,911)
- - - - - (249,369) (249,369)

Balances as at June 30, 2014 383,645 383,645 75,000 458,645 2,500,000 434,566 3,776,856

Total comprehensive income


for the year ended June 30, 2015 - - - - - 60,956 60,956

Transactions with owners

Final cash dividend for the year


ended June 30, 2014 at Rs.3.00
per share i.e. @30% - - - - - (115,093) (115,093)

Interim cash dividend for the year


ended June 30, 2015 at Rs.2.00
per share i.e. @20% - - - - - (76,729) (76,729)
- - - - - (191,822) (191,822)

Balances as at June 30, 2015 383,645 383,645 75,000 458,645 2,500,000 303,700 3,645,990

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 39
GATRON

Notes To The Financial Statements


FOR THE YEAR ENDED JUNE 30, 2015

1 THE COMPANY AND ITS OPERATIONS

The Company was incorporated in Pakistan in 1980 as a Public Limited Company and its shares
are quoted at all the Stock Exchanges of Pakistan since 1992. The registered office of the
Company is situated at Room No. 32, 1st floor, Ahmed Complex, Jinnah Road, Quetta. The
principal business of the Company is manufacturing of Polyester Filament Yarn alongwith its
raw material viz. Yarn Grade Polyester Chips. However, the Company also produces other
varieties of Polyester Chips viz Bottle Grade as well as PET Preforms. The Company also owns
following Subsidiary Companies:

- Gatro Power (Private) Limited, which is engaged in power generation

- Global Synthetics Limited, which has yet to commence its operations

- GT Universal Limited, for which the Members of the G.T Universal Limited in the Extra
Ordinary General Meeting held on March 09, 2015, had resolved for voluntary winding
up. All requirement for voluntary winding up have been completed and now the said
subsidiary stands dissolved w.e.f. June 9, 2015.

2 BASIS OF PREPARATION

2.1 Statement of Compliance

These financial statements have been prepared in accordance with the approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such
International Financial Reporting Standards (IFRSs) issued by the International Accounting
Standards Board as are notified under the Companies Ordinance, 1984, provisions of and
directives issued under the Companies Ordinance, 1984. In case the requirements differ,
the provisions or directives of the Companies Ordinance, 1984 shall prevail.

2.2 Changes in accounting standards, interpretations and pronouncements

a) Standards, interpretations and amendments to published approved accounting


standards that became effective during the year

The following Standards, interpretations and amendments to published approved


accounting standards became effective during the year.

IAS-19 Employee Benefits - Amendment


IAS-32 Financial Instrument: Presentation - Amendment
IAS-36 Impairment of Assets - Amendment
IAS-39 Financial Instrument: Recognition and Measurement - Amendment
IFRIC-21 Levies

These Standards, interpretations and amendments are not expected to have significant
impact on company's financial statements. In addition to above, certain new cycle
of improvements are applicable in current year, are either considered not to be
relevant or are not expected to have significant impact to the company's financial
statements and hence have not been specified.

b ) Standards, interpretations and amendments to published approved accounting


standards that are not yet effective

The following Standards, interpretations and amendments to published approved


accounting standards that are effective for accounting periods, beginning on or after
the date mentioned against each to them.

Page 40
Annual Report of Gatron (Industries) Limited 2015

Effective for the period


beginning on or after

IAS-16 Property, Plant and Equipment - Amendment January 01, 2016


IAS-27 Separate Financial Statements - Amendment January 01, 2016
IAS-38 Intangible Assets - Amendment January 01, 2016
IAS-41 Agriculture - Amendment January 01, 2016
IFRS-9 Financial Instruments: Classification and
Measurement January 01, 2015
IFRS-10 Consolidated Financial Statements - Amendment January 01, 2016
IFRS-11 Joint Agreements - Amendment January 01, 2016
IFRS-12 Disclosure of Interests in Other Entities -
Amendment January 01, 2016

These standards, interpretations and the amendments are either not relevant to or
are not expected to have significant impact on the company's financial statements
other than certain disclosures, if applicable.

In addition to above, certain new cycle of improvements will apply prospectively


for period beginning on or after 01, July 2015, are either considered not to be relevant
or are not expected to have significant impact to the company's financial statements
and hence have not been specified.

c) New Standards issued by IASB and notified by SECP but not yet effective

Following new standards issued by IASB have been adopted by the Securities and
Exchange Commission of Pakistan for the purpose of applicability in Pakistan
through SRO 633(1) / 2014 dated July 10, 2014 and will be effective for annual periods
beginning on or after January 01, 2015.

IFRS-10 Consolidated Financial Statements


IFRS-11 Joint Arrangements
IFRS-12 Disclosure of Interest in Other Entities
IFRS-13 Fair Value Measurement

These new standards are either irrelevant or will not have any significant effect on
the Companys financial statements except IFRS 10, which is briefly described below:.

IFRS-10 Consolidated Financial Statements

This is a new standard that replaces the consolidation requirements in SIC - 12


Consolidation: Special Purpose Entities and IAS 27 - Consolidated and Separate
Financial Statements. The proposed standard builds on existing principles by identifying
the concept of control as the determining factor in whether an entity should be
included within the consolidated financial statements of the Parent Company and
provides additional guidance to assist in the determination of control where this is
difficult to assess.

2.3 Basis of measurement

These financial statements have been prepared under the historical cost convention except
otherwise specifically stated in note 3.

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GATRON

2.4 Significant Accounting Estimates and Judgments

The preparation of financial statements requires management to make judgments, estimates


and assumptions that have an effect on the application of policies and reported amounts
of assets, liabilities, income and expenses. The estimates and associated assumptions are
based on experience and various other factors that, in the considered opinion of the
management, are reasonable, under the circumstances, the results whereof provide the
basis of making judgment in relation to carrying value of assets and liabilities that are not
readily measurable, using other means. The definitive impact of ultimate outcome, may
fluctuate from these estimates.

The estimates and underlying assumptions are periodically appraised. Revision to accounting
estimates is recognized and effect is given in the period in which estimates are revised, or
in the period of the revision and future periods as appropriate.

Judgments made by the management that have significant effect on the financial statements
and estimates with a significant probability of material adjustment in future are disclosed
hereunder:

a) Property, plant and equipment


The Company's management reviews the estimated useful lives and related depreciation
charge for its property, plant and equipment on each financial year end. The Company
reviews the value of the assets for possible impairment on each financial year end.
Any change in the estimate in future years might affect the carrying amounts of the
respective items of property, plant and equipment with a corresponding effect on
the depreciation, impairment and deferred tax.

b) Trade debts
The estimates of doubtful trade debts, are made, using and appropriately judging the
relevant inputs and applying parameters as stated in note 3.6, as the management
considers appropriate, which, on actual occurrence of the subsequent event, may
fluctuate. The effect of variation is recorded as and when it takes place.

c) Stock in trade
The Company reviews the net realisable value of stock-in-trade to assess any diminution
in the carrying values on each financial year end. Net realisable value is determined
with respect to estimated selling prices less estimated expenditure to make the sales.

d) Stores, spare parts and loose tools


The estimates of slow moving and obsolete stores, spare parts and loose tools, are
made, using and appropriately judging the relevant inputs and applying the parameter
i.e. age analysis, as the management considers appropriate, which, on actual occurrence
of the subsequent event, may fluctuate. The effects of variation is recorded as and
when it takes place.

e) Defined benefit plan


The actuarial valuations of defined benefit plan, have been premised on certain
actuarial hypothesis, as disclosed in note 3.8 (b) to the financial statements. Changes
in assumptions in future years may affect the liability under this scheme upto those
years.

f) Income tax
In making the estimate for income tax liabilities, the management considers current
income tax law and the decisions of appellate authorities. Deferred tax estimate is
made considering future applicable tax rate, as also stated disclosed in note 3.10 to
the financial statements.

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Annual Report of Gatron (Industries) Limited 2015

g) Impairment of investment in Subsidiary and Associated Company

In making an estimate of recoverable amount of the Company's investment, the


management considers breakup value of shares of respective period.

h) Contingencies

The assessment of the contingencies inherently involves the exercise of significant


judgment as the outcome of the future events cannot be predicted with certainty.
The Company, based on the availability of the latest information, estimates the value
of contingent assets and liabilities which may differ on the occurrence/non-occurrence
of the uncertain future event(s).

2.5 Functional and reporting currency

These financial statements are presented in Pakistan Rupee, which is the Company's
functional currency.

3 SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are
set out below.

3.1 Property, plant and equipment

These are stated at cost less accumulated depreciation and impairment if any, except free-
hold land, lease-hold land and capital work in progress which are stated at cost. No
amortisation is provided on leasehold land since the leases are renewable at the option of
the lessee at nominal cost and their realisable values are expected to be higher than
respective carrying values. Depreciation is charged on diminishing balance method at the
rates mentioned in Note 4.1, whereby the depreciable amount of an asset is written off
over its estimated useful life.

Depreciation on addition is charged from the month of the asset is available for use upto
the month prior to disposal.

Subsequent costs (including those on account of major repairs) are included in the asset's
carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future additional economic benefits associated with such additional cost will flow to
the Company and the cost of the item can be measured reliably. All other repairs and
maintenance incurred are taken to profit and loss account.

The carrying amounts of the Company's assets are reviewed at each financial year end
whether there is any indication of impairment. If such indication exists, the carrying
amounts of such assets are reviewed to assess whether they are recorded in excess of their
respective estimated recoverable amounts. Where estimated carrying amounts exceed the
respective recoverable amounts, the estimated carrying amounts are appropriately adjusted
with impairment loss recognised in profit and loss account for the year. The recoverable
amount is the higher of an asset's fair value less cost to sell and value in use. Fair value
means the amount for which an asset could be exchanged between knowledgeable and
willing parties in an arm's length transaction. Where an impairment loss is recognised,
the depreciation charge is adjusted in the future periods to allocate the asset's revised
carrying amount over its estimated useful life.

Gain or loss on deletion of property, plant and equipment, if any, is taken to profit and
loss account.

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GATRON

3.2 Impairment of assets


Value of all Company's assets are reviewed at each financial year end to determine whether
there is objective evidence of impairment. If any such indication exists, the assets' recoverable
amount is estimated and carrying amounts are adjusted accordingly. Impairment losses
are recognised in the profit and loss account.

3.3 Investments
Subsidiary and Associated Companies
Investment in Subsidiary and Associated Companies are initially recognized at cost. The
carrying amount of investments is reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists the investment's
recoverable amount is estimated which is higher of its value in use and its fair value less
cost to sell. An impairment loss is recognized if the carrying amount is exceeds its
recoverable amount. Impairment losses are recognized in the Profit and Loss Account.
An impairment loss is reversed if there has been a change in estimates used to determine
the recoverable amount but limited to the extent of initial cost of investments. A reversal
of impairment loss is recognized in the Profit and Loss Account.

The investment in associated company has not been accounted for using the equity method
in these accounts as the Company prepares Consolidated Financial Statements in accordance
with IAS 27 Separate Financial Statements.

3.4 Stores, spare parts and loose tools


These are valued at monthly weighted average cost. Items in transit are valued at cost
comprising of invoice value and other incidental charges incurred thereon till the balance
sheet date. Adequate provision is made for slow moving and obsolete items based on
parameter set out by the management as stated in note 2.4 (d). The major value spares and
stand by equipments are capitalized and depreciated according to their useful life.

3.5 Stock in trade


These are valued at lower of weighted average cost and net realisable value. The value of
goods in process and finished goods represents cost of direct materials plus applicable
labour and production overheads.

Net realisable value signifies the estimated selling price in the ordinary course of business
less the estimated costs necessary to make the sale.

Stock in transit is valued at cost comprising invoice value plus other incidental charges
incurred thereon upto the balance sheet date.

3.6 Trade debts


Trade debts are recognised at invoice value which is fair value of the good sold. Export
debtors are translated into Pak Rupee at the rate prevailing on the balance sheet date. A
provision for doubtful debt is established when there is objective evidence that the
Company will not be able to collect amounts due according to the original terms of the
trade debts. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation or overdue amount allowance, and default
or delinquency in making payments are considered indicators that the trade debt is doubtful
and the provision is recognised in the profit and loss account. When a trade debt is
uncollectible, it is written off.

3.7 Cash and cash equivalents


For the purpose of cash flow statement, cash and cash equivalents comprise cash and bank
balances and short term borrowings.

Page 44
Annual Report of Gatron (Industries) Limited 2015

3.8 Employees' post employment benefits


a) Defined contribution plan
The Company and the eligible employees contribute equally to recognised Provident
Funds.
b) Defined benefit plan
The Company operates an unfunded defined gratuity scheme, being not mandatory
under the law, for its employees and working directors who attain the minimum
qualification period. The obligation is determined through actuarial valuation by
using the Projected unit credit method. The latest actuarial valuation was conducted
on the balances as at June 30, 2015.
3.9 Compensated unavailed leaves
The Company accounts for its estimated liability towards unavailed leaves accumulated
by employees on accrual basis.
3.10 Income Tax
Current
Liability for current income tax is accounted for in accordance with income tax law. The
income tax on profit and loss account represents current provision after adjustment, if
any, to the provision for tax made in previous years, including those arising from assessments
and amendments in assessments during the year, for such years.
Deferred
The Company accounts for deferred income tax on all temporary timing differences using
the liability method. Deferred income tax assets are recognised to the extent, it is probable
that taxable profit will be available against which, the deductible temporary differences,
unused tax losses and tax credits, can be utilised.
Deferred tax is calculated at the rates that are expected to apply to the period when the
differences reverse, based on tax rates that have been enacted or substantively enacted by
the balance sheet date. In this regard, the effect on deferred taxation of the portion of
income expected to be subject to final tax regime is adjusted.
3.11 Trade and other payables
Trade and other payables are carried at cost, which is the fair value of the consideration
to be paid in future for goods and services.
3.12 Provision
Provision is recognised when the Company has present legal or constructive obligations
as result of past events, if it is probable that an outflow of resources will be required to
settle the obligation, and reliable estimate of the amounts can be made.
3.13 Borrowings and their cost
Borrowings are recorded as the proceeds received.
Borrowing costs are recognised as an expense in the period in which these are incurred
except to the extent of borrowing costs that are directly attributable to the acquisition,
construction, installation or production of a qualifying asset, where borrowing costs, if
any, are capitalised as part of the cost of that asset.

3.14 Foreign currency transactions and translation


Foreign currency transactions are recorded into Pak Rupee using the prevailing exchange
rates. As on balance sheet date, monetary assets and liabilities in foreign currencies are
translated into Pak Rupees at the prevailing exchange rates on the balance sheet date.
Resultant exchange differences are taken to profit and loss account.

Page 45
GATRON

3.15 Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow
to the Company and the revenue can be measured reliably. Revenue is measured at the
fair value of the consideration received or receivable. The revenue from diverse sources
is recognised as explained below:

- Sale and processing services are recognised on dispatch of goods to customer.


- Dividend income is recognised when the right of receipt is established.
- Storage and handling income is recognised on accrual basis after receipt of material.

3.16 Dividend and appropriation to reserves

Liability for dividend and appropriation to reserve are recognised in the financial statements
in the period in which these are approved.

3.17 Financial instruments

All the financial assets and financial liabilities are recognised at the time when the Company
becomes a party to the contractual provisions of the financial instruments and derecognised
fully or partly when the Company fully or partly losses control of contractual rights that
comprise the financial assets and in the case of financial liabilities when the obligation
specified in the contract is fully or partly discharged, cancelled or expired. Any gain or
loss representing value differential if any on derecognition of the financial assets and
financial liabilities is taken to profit and loss account.

3.18 Offsetting of financial assets and financial liabilities

A financial asset and a financial liability is offset and the net amount is reported in the
balance sheet, if the Company has a legally enforceable right to set-off the recognised
amounts and the Company intends either to settle on a net basis or to realise the asset and
discharge the liability simultaneously.

3.19 Segment information

Operating segments are reported in a manner consistent with the internal reporting
structure. Management monitors the operating results of its business units separately for
the purpose of making decisions regarding resource allocation and performance assessment.

Segment results, assets and liabilities include items directly attributable to segment as well
as those that can be allocated on a reasonable basis.

Segment capital expenditure if any, is the total cost incurred during the year to acquire
property, plant and equipment.

(Pak Rupees in Thousand)


Notes 2015 2014

4 PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 4.1 1,778,431 1,757,504


Capital work in progress 4.4 58,802 40,287
1,837,233 1,797,791

Page 46
Annual Report of Gatron (Industries) Limited 2015

4.1 Operating fixed assets


Land Building Office Plant and Furniture Factory Office Motor Store and TOTAL
premises machinery and equipment equipment vehicles spares held
Particulars Freehold Leasehold On On fixture for capital
freehold leasehold expenditure
land land
--------------------------------------------------------------- (Pak rupees in thousand) ---------------------------------------------------------------
Net carrying value
Year ended June 30, 2015
Opening net book value 25,320 13,748 1,007 114,415 5,262 1,454,774 3,063 30,712 9,137 85,427 14,639 1,757,504
Additions at cost - - - - - 42,243 332 3,759 716 17,899 - 64,949
Transfer from capital work in progress - - - 2,438 - 249,362 - 2,968 60 - - 254,828
Disposal at NBV - - - - - - - - 123 4,540 - 4,663
Depreciation - - 101 11,685 526 250,729 647 7,017 2,418 18,868 2,196 294,187
Closing net book value 25,320 13,748 906 105,168 4,736 1,495,650 2,748 30,422 7,372 79,918 12,443 1,778,431

Gross carrying value


At June 30, 2015
Cost 25,320 13,748 14,248 430,082 9,902 6,266,820 17,593 74,011 58,968 163,337 18,795 7,092,824
Accumulated depreciation - - 13,342 324,914 5,166 4,771,170 14,845 43,589 51,596 83,419 6,352 5,314,393
Net book value 25,320 13,748 906 105,168 4,736 1,495,650 2,748 30,422 7,372 79,918 12,443 1,778,431

Net carrying value


Year ended June 30, 2014
Opening net book value 25,320 13,748 1,119 124,981 5,847 1,362,061 3,495 8,049 11,867 60,331 17,222 1,634,040
Additions at cost - - - - - 3,605 501 989 967 52,930 - 58,992
Transfer from capital work in progress - - - 2,127 - 320,599 - 27,525 435 - - 350,686
Disposal at NBV - - - - - 89 214 - 1,319 10,651 - 12,273
Depreciation - - 112 12,693 585 231,402 719 5,851 2,813 17,183 2,583 273,941
Closing net book value 25,320 13,748 1,007 114,415 5,262 1,454,774 3,063 30,712 9,137 85,427 14,639 1,757,504

Gross carrying value


At June 30, 2014
Cost 25,320 13,748 14,248 427,644 9,902 5,975,215 17,261 67,284 58,607 160,074 18,795 6,788,098
Accumulated depreciation - - 13,241 313,229 4,640 4,520,441 14,198 36,572 49,470 74,647 4,156 5,030,594
Net book value 25,320 13,748 1,007 114,415 5,262 1,454,774 3,063 30,712 9,137 85,427 14,639 1,757,504

Depreciation rate
% per annum - - 10 10 10 15 to 25 20 20 20 to 30 20 15

4.2 Depreciation for the year has been allocated as follows:-

(Pak Rupees in Thousand)


Notes 2015 2014

Cost of sales 26 286,443 266,557


Distribution and selling expenses 27 943 1,051
Administrative expenses 28 6,801 6,333
294,187 273,941

Page 47
GATRON

4.3 Details of property, plant and equipment disposed off during the year :
(Pak Rupees in Thousand)
Description Cost Book Sale Mode of Particulars of Buyers
Value Proceeds Disposal
OFFICE EQUIPMENT
Gas Generator Kohler 415 123 28 Negotiation M/s. Pak Autos Mechanical Workshop
(14KVA) Korangi Crossing near Bhittai Colony,
PAF Road, Karachi.
Sub Total 415 123 28 -- --

MOTOR VEHICLES
Suzuki Cultus 677 142 507 Company Mr.Kafeel (Employee)
APL-940 Policy
Suzuki Cultus 814 224 520 --do-- Mr.Attique Ahmed (Employee)
ARM-053
Toyota Corolla 1,414 560 765 --do-- Mr.Muhammad Khaliq-uz-Zaman (Employee)
ATR-835
Toyota Corolla 1,389 404 690 --do-- Mr.Zubair Daud (Employee)
ARV-573
Toyota Corolla 1,389 396 865 --do-- Mr.Muhammad Iqbal (Employee)
ASA-355
Honda Civic 1,719 581 875 --do-- Mr.Abdul Ghaffar (Employee)
ASW-582
Toyota Corolla 849 53 590 --do-- Mr.Pervaiz (Employee)
AET-073
Suzuki Alto 620 155 613 --do-- Mr.Abdul Khalique (Employee)
ARH-136
Suzuki Alto 530 100 346 --do-- Mr.Javed (Employee)
AQQ-564
Suzuki Liana 1,024 286 654 --do-- Mr.Abdul Ghaffar (Employee)
ASH-884
Suzuki Baleno 774 62 350 Negotiation Mr.Sanaullah Khan
AEZ-933 House#48/A, New Haji Camp, Karachi.
Toyota Corolla 1,169 82 490 --do-- Mr.Muhammad Shakeel
AFL-403 Plot# 8, Street# 3, Muslimabad, Karachi.
Toyota Corolla 1,718 1,305 1,500 Insurance M/s. EFU General Insurance
AZD-822 Claim Karachi.
Items having book value 550 190 413 Various Various
upto Rs.50 thousand each

Sub Total 14,636 4,540 9,178 -- --

Total - 2015 15,051 4,663 9,206 -- --


Total - 2014 34,436 12,273 20,731 -- --

Page 48
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


4.4 Capital Work-in-Progress

Balance as Transfer to Balance as


at July 1, Additions Operating at June 30,
2014 fixed assets 2015
Factory building on lease hold
land under construction 3,861 1,166 (2,438) 2,589
Plant and machinery under erection 36,426 265,263 (249,362) 52,327
Factory equipment - 6,854 (2,968) 3,886
Office equipment - 60 (60) -
40,287 273,343 (254,828) 58,802

Balance as Transfer to Balance as


at July 1, Additions Operating at June 30,
2013 fixed assets 2014
Factory building on lease hold
land under construction 1,594 4,394 (2,127) 3,861
Plant and machinery under erection 83,625 273,400 (320,599) 36,426
Factory equipment - 27,525 (27,525) -
Office equipment - 435 (435) -
85,219 305,754 (350,686) 40,287

(Pak Rupees in Thousand)


Notes 2015 2014

5 LONG TERM INVESTMENTS


Related Parties

Wholly owned Subsidiary Companies

22.575 million (2014: 22.575 million) shares


including 7.525 million bonus shares in
Messrs. Gatro Power (Private) Limited 5.1 150,500 150,500

Nil (2014: 25,000) shares in


Messrs. G T Universal Limited - Unlisted 5.2 - 250

25,000 (2014: 25,000) shares in


Messrs. Global Synthetics Limited - Unlisted 5.3 250 250
150,750 151,000
Impairment loss 5.4 (108) (231)
150,642 150,769
Associated Companies

56.7 million (2014: 56.7 million) shares


including 12 million bonus shares in
Messrs. Novatex Limited - Unlisted 5.5 447,000 447,000
597,642 597,769

Page 49
GATRON

5.1 The value of investment on the basis of the net assets, as disclosed in its audited financial
statements as at June 30, 2015 amounted to Rs.879.365 million (2014: Rs.694.101 million).

5.2 During the year, the Subsidiary Company has been wounded up voluntarily and Rs. 12
thousand have been received against the amount invested.

5.3 The value of the investment on the basis of the net assets, as disclosed in its audited
financial statements as at June 30, 2015 amounted to Rs.0.142 million (2014: Rs.0.178
million).

(Pak Rupees in Thousand)


2015 2014

5.4 Impairment loss


Balance at beginning 231 158
Charge for the year 115 73
Reversals due to winding up of Subsidiary Company (238) -
Balance at end 108 231

5.5 The value of 56.7 million (2014: 56.7 million) shares being 36.83% (2014: 36.83%) holding
of the total issued share capital of Associated Company, on the basis of the net assets,
as disclosed in its un-audited financial statements as at March 31, 2015 amounted to
Rs.3,616.764 million (March 2014: Rs.3,780.174 million).

6 LONG TERM LOANS - Considered good


Secured - Interest free

To employees other than Chief Executive & Directors 7,720 4,142


Amount due in twelve months shown under current assets (6,916) (3,931)
Recoverable within three years 804 211

6.1 The above loans are under the terms of employment and are secured against the post
employment benefits of the employees.

6.2 It includes loans to executives and its reconciliation is as under:

Balance at beginning - 308


Disbursements during the year 4,500 74
Recoveries during the year (1,371) (382)
Balance at end 3,129 -

6.2.1 The maximum aggregate amount of loan due from executives at any month end
during the year was Rs.3.860 million (2014: Rs.0.336 million).

7 LONG TERM DEPOSITS

Security deposits for utilities and others 1,669 1,671

Page 50
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

8 STORES, SPARE PARTS AND LOOSE TOOLS


In hand:

Stores 103,456 115,356


Spare parts 361,117 340,567
Loose tools 3,583 1,677
468,156 457,600
Provision for slow moving stores, spare
parts and loose tools 8.1 (26,480) (15,388)
441,676 442,212
In transit 5,424 52,565
447,100 494,777

8.1 Provision for slow moving stores,


spare parts and loose tools
Balance at beginning 15,388 12,952
Charge for the year 11,101 2,816
Reversals due to consumption (9) (380)
11,092 2,436
Balance at end 26,480 15,388

9 STOCK IN TRADE
Raw material 540,006 714,877
Raw material in transit 20,686 5,923
Goods in process 779,088 628,472
Finished goods 1,170,397 966,009
2,510,177 2,315,281

These include raw material costing Rs.364.285 million (2014: Nil) valued at net realisable value
of Rs.338.785 million (2014: Nil), goods in process costing Rs.787.389 million (2014: Rs.403.373
million) valued at net realisable value of Rs.733.236 million (2014: Rs.392.523 million) and
finished goods costing Rs.1,073.267 million (2014: Rs.816.457 million) valued at net realisable
value of Rs.960.366 million (2014: Rs.759.728 million).

10 TRADE DEBTS

Considered good
Secured
Local 51,274 81,697
Export 86,388 74,432
10.1 137,662 156,129
Unsecured 630,051 932,636
767,713 1,088,765
Considered doubtful
Unsecured 67,975 60,446
Provision for doubtful debts 10.2 (67,975) (60,446)
- -
767,713 1,088,765

10.1 These are secured against letters of credit issued by banks in favour of the Company.

Page 51
GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

10.2 Provision for doubtful debts


Balance at beginning 60,446 24,963
Charge for the year 37,829 58,843
Reversals since recovered (29,730) (22,714)
8,099 36,129
Write offs (570) (646)
Balance at end 67,975 60,446

11 LOANS AND ADVANCES - Considered good

Secured
Amount recoverable in twelve months from
employees and executives 6 6,916 3,931
Advances to employees 11.1 651 390
7,567 4,321
Unsecured
Advances:
to suppliers and contractors 11.2 31,114 28,741
for imports 4,703 3,606
35,817 32,347
43,384 36,668

11.1 These represent advances against monthly salaries under the terms of employment.

11.2 These include advances against purchase of vehicles amounting to Rs.3.969 million (2014:
Rs.4.731 million).

12 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS

Security deposits 220 3,756


Prepayments 12.1 3,262 11,492
3,482 15,248

12.1 These include prepayments to a related party i.e. Messrs. Novatex Limited of Rs. Nil
(2014: Rs.11.223 million) being the amount of advance rent.

13 OTHER RECEIVABLES - Considered good

Receivable from suppliers 13.1 26,371 168,259


Claims receivable from suppliers 1,327 678
Claims receivable from Insurance Companies - 3,411
Sales tax 158,244 65,515
Others 13.2 1,249 1,585
187,191 239,448

13.1 These include balances of US$ 0.112 million (2014: US$ 1.707 million).

13.2 These include Rs.Nil (2014: Rs.0.405 million) receivable from related party i.e. Messrs.
Gatro Power (Private) Limited.

Page 52
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

14 TAXES REFUND DUE FROM FEDERAL


GOVERNMENT

Income tax 178,905 100,016


Sales tax 16,508 188
195,413 100,204

15 CASH AND BANK BALANCES

Cash :
In hand 1,567 1,604
At banks in current accounts : Local currency 15.1 76,610 101,600
Foreign currency 15.2 963 767
79,140 103,971

15.1 These Includes Rs.2.310 million (2014: Rs.2.115 million) received from contractors as
security deposit.

15.2 These represent balances of US$ 8,226.46 and Euro 1,129.98 (2014 : US$ 6,236.92 and
Euro 1,129.98).

16 SHARE CAPITAL

16.1 Authorised capital


44,000,000 Ordinary shares of Rs. 10 each 440,000 440,000

16.2 Issued, subscribed and paid up capital


30,136,080 Ordinary shares of Rs.10 each allotted
for consideration paid in cash 301,361 301,361
8,228,400 Ordinary shares of Rs.10 each allotted
as fully paid bonus shares 82,284 82,284
38,364,480 383,645 383,645

These include 1,620,387 (2014 : 1,620,387) shares held by an associated company, Messrs.
Gani & Tayub (Private) Limited.

17 CAPITAL RESERVES

Share premium 17.1 383,645 383,645


Others 17.2 75,000 75,000
458,645 458,645

17.1 This represents premium of Rs. 20 per share received on initial public issue of 17,438,400
shares in 1992 and premium of Rs. 10 per share received on right issue of 3,487,680 shares
in 1998. This reserve can be utilised by the Company only for the purposes specified in
section 83(2) of the Companies Ordinance, 1984.

17.2 This represents reserve for replacement of plant and machinery.

18 GENERAL RESERVE 2,500,000 2,500,000

This represents reserve created from accumulation of past years' profit, to meet future exigencies.

Page 53
GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

19 DEFERRED LIABILITIES
Income tax-net 19.1 160,654 219,406
Defined benefit plan 19.2 243,959 181,122
404,613 400,528

19.1 This comprises of the following major timing differences:


Deferred tax liability arising in respect of accelerated
tax depreciation allowances 190,880 244,431
Deferred tax asset arising in respect of :
Provision for doubtful debts (21,752) (19,947)
Provision for slow moving stores, spare parts
and loose tools (8,474) (5,078)
160,654 219,406

At the balance sheet date, deferred tax asset amounting to Rs.167.790 million has not been
recognized considering that it is not probable that sufficient taxable profit will be available
in future.

19.2 Actuarial valuation of the plan was carried out as at June 30, 2015. The calculation for
provision of defined benefit plan is as under:-
Movement of the liability recognised in the balance sheet
Balance at beginning 181,122 149,440
Expense 19.2.1 40,561 25,073
Remeasurement: actuarial losses on obligation 27,955 11,192
Payment (5,679) (4,583)
Balance at end 243,959 181,122

19.2.1 Expense
Service cost 16,939 8,151
Interest cost 23,622 16,922
40,561 25,073

% %
The principal actuarial assumptions used were as follows:
Discount rate 9.75% 13.25%
Future salary increase rate - Short term 13.00% 11.25%
Future salary increase rate - long term 8.75% 11.25%
Withdrawal Rate Moderate Moderate
Mortality Adjusted SLIC Adjusted SLIC
2001 - 2005 2001 - 2005
Sensitivity Analysis
PVDBO Percentage
(Pak Rupees in Change
Thousand)
Current Liability 243,959 -
+ 1% Discount Rate 232,677 -4.62%
- 1% Discount Rate 256,844 5.28%
+ 1% Salary Increase Rate 257,410 5.51%
- 1% Salary Increase Rate 231,988 -4.91%
+ 10% Withdrawal Rates 243,980 0.01%
- 10% Withdrawal Rates 243,939 -0.01%
1 Year Mortality age set back 244,210 0.10%
1 Year Mortality age set forward 243,720 -0.10%

Page 54
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

20 TRADE AND OTHER PAYABLES

Trade creditors 173,497 123,959


Bills payable 384,315 481,580
Accrued expenses 20.1 750,130 182,847
Advance payments from customers 286,987 250,106
Creditors for capital expenditures 82 55
Security deposits from contractors 20.2 2,310 2,115
Workers' Welfare Fund 6,720 5,518
Infrastructure Cess on imports 20.3 87,137 74,613
Unclaimed dividend 40,666 10,146
Withholding taxes 7,641 7,331
Payable to Provident Fund Trusts 3,113 2,946
Other liabilities 20.4 34,377 31,809
1,776,975 1,173,025

20.1 These include Rs.573.436 million (2014: Rs.13.226 million), Rs.4.476 million (2014: Rs.2.357
million) and Rs.0.349 million (2014: Rs.0.409 million) payable to related parties i.e. Messrs.
Gatro Power (Pvt) Limited, Messrs. Novatex Limited and Messrs. Gani & Tayub (Private)
Limited respectively.

20.2 This represents deposits from contractors held in separate bank account.

20.3 Infrastructure Cess on imports

Balance at beginning 74,613 59,885


Provision made during the year 26,568 27,937
Payment made during the year (14,044) (13,209)
Balance at end 87,137 74,613

The Company had filed a petition in the High Court of Sindh at Karachi challenging the
levy of Infrastructure Cess on imports. The Divisional Bench announced Judgment
adjudicating the levy collected upto December 27, 2006 as invalid and collection thereafter
as valid. The Company and the respondent filed appeals before the Supreme Court of
Pakistan challenging the partial judgment of the High Court of Sindh.

In due course of time, the Government of Sindh withdrew its petition from the Supreme
Court. Later on the Supreme Court vide its order dated May 20, 2011 set aside the order
passed by the High Court of Sindh. Consequently a new petition was filed by the Company
in the High Court of Sindh. Through an interim order dated May 31, 2011, the High
Court of Sindh ordered to pay 50% in cash of this liability effective from December 28,
2006 and to submit bank guarantee for the rest of 50% until the final order is passed. Till
balance sheet date, the Company has provided bank guarantee amounting to Rs.89.865
million (2014: Rs.74.865 million) in favour of Excise and Taxation Department, in respect
of consignments cleared after December 27, 2006. Based on the legal advise, the management
believes that the case will be decided in favour of the Company. However, full provision
after December 27, 2006 has been made in the accounts as an abundant precaution.

20.4 These include Rs.25.904 million (2014: Rs.24.318 million) received from employees under
company car policy.

Page 55
GATRON

(Pak Rupees in Thousand)


2015 2014

21 ACCRUED MARK UP

Mark up on short term borrowings 16,789 25,880

22 SHORT TERM BORROWINGS - Secured


From banking companies under mark up arrangements

Running finance 625,512 1,287,334


Finance under F.E. Circular No.25 of SBP-Foreign currency 137,367 -
Export re-finance - 100,000
762,879 1,387,334

22.1 The Company has aggregate facilities of short term borrowings amounting to Rs.4,605
million (2014: Rs.4,555 million) from various commercial banks (as listed in Note 22.3)
out of which Rs.3,901 million (2014: Rs.3,387 million) remained unutilised at the year
end. The Company also has Rs.1,000 million (2014: Rs.325 million) swinging facility with
an Associate Company, out of which Rs.59 million (2014: Rs.219 million) utilized by the
Company at the year end. The mark up rates for running finance ranged between Rs.0.2573
to Rs.0.3008 per Rs.1000/- per day. Finance under F.E. Circular No.25 of SBP represents
US$ 1.351 million (2014: Nil) and repayable in foreign currency. The rate of mark up on
Finance obtained under F.E. Circular No.25 of SBP is 2% per annum. These facilities are
renewable annually at respective maturities.

22.2 These arrangements are secured against pari passu hypothecation charge on the stock and
book debts of the Company.

22.3 The finances have been obtained or are available from Bank Al-Falah Limited, Bank Al-
Habib Limited, Dubai Islamic Bank Limited, Faysal Bank Limited, Habib Bank Limited,
Habib Metropolitan Bank Limited, JS Bank Limited, MCB Bank Limited, Meezan Bank
Limited, National Bank of Pakistan, NIB Bank Limited, Samba Bank Limited, Standard
Chartered Bank (Pakistan) Limited and United Bank Limited.

23 PROVISION FOR INCOME TAX LESS PAYMENTS


Balance at beginning 28,181 (43,014)
Provision for the year - Current 89,392 74,285
Prior (59,451) -
29,941 74,285
58,122 31,271
Payments during the year (73,309) (51,889)
Adjustments for the year 78,889 48,799
Balance at end 63,702 28,181

Page 56
Annual Report of Gatron (Industries) Limited 2015

24 CONTINGENCIES AND COMMITMENTS


24.1 Contingencies
a) The Company makes provision for Workers Profit Participation Fund, based on
the managements considered view that the law on workers participation in profits,
necessitates participation of the workers, in the manner laid down in the law, from
net profit [from which all the expenses, including cesses, levies and taxes, are fully
deducted] and which is available for participation and attributable to workers role
which may be subject to interpretation by the relevant authority. The quantum of
the differential amount upto June 30, 2015 involved is Rs.27.623 million (2014:
Rs.27.623 million) and no provision for that amount is considered in the financial
statements as the management is confident that no further liability will arise on this
account. Accordingly, the Company has discharged its liability on the basis of
management considered view and so far no negative inference has been communicated
to the Company.
b) FBR initiated action against few buyers of Company for violating/non compliance
of the provisions of SRO 1125 dated December 31, 2011 and alleging the Company
to provide them assistance and illegal facilitation. The dispute relates to the period
of time when supplies were zero rated and as a result of which the Company had
to pay Rs.27.762 million and had also to submit post-dated cheques of Rs. 83.287
million under protest in favour of Chief Commissioner Inland Revenue.
The Company has, however, challenged the action before the Honorable High
Court of Sindh. Realizing the facts of the case, circumstances and legal position, the
Honorable High Court of Sindh has granted interim relief whereby encashment of
above mentioned post dated cheques has been restrained.
By way of abundant precaution, the amount of Rs. 27.762 million has been charged
to profit and loss account in last year. Based on the merits of the case and discussion
held with the legal counsel, the management is confident that the case will be decided
in favour of the Company. Accordingly no provision has been made for the amount
of post dated cheques of Rs.83.287 million.
c) The Government of Pakistan, through Finance Act 2012, by an amendment in Second
Schedule of The Gas Infrastructure Cess Act 2011, increased the Gas Infrastructure
Development Cess (GIDC) from July-2012 from Rs.13 to Rs.100 per MMBTU. This
was subsequently reduced by the Government to Rs.50 per MMBTU from
September-2012. The Company alongwith several other companies filed suit in the
Sindh High Court challenging the increase in GIDC. The Sindh High Court has
been pleased to stay recovery of the enhanced GIDC and hence the Company has
not paid the enhanced GIDC. Additionally, the Government through Finance Act
2014, by promulgating the Gas Development Infrastructure Cess Ordinance 2014,
has increased the amount of GIDC for both captive power and industrial consumption
to Rs.200 & Rs.150 per MMBTU respectively. This time also the Company alongwith
several other companies has filed a suit in the Sindh High Court, challenging the
increase in GIDC and Sindh High Court granted stay accordingly.

On May 22, 2015 the Gas Infrastructure Development Cess (GIDC) Act, 2015 was
promulgated whereby GIDC rates of Rs.100 per MMBTU and Rs.200 per MMBTU
were fixed for industrial and captive power consumers, respectively. The GIDC Act,
2015 was made applicable with immediate effect superseding the GIDC Act, 2011
and GIDC Ordinance, 2014. The matter regarding levy of the GIDC prior to
promulgation of the GIDC Act, 2015 is presently indeterminate and subjudice. The
Company along with several other companies filed suit in the Honorable Sindh High
Court challenging the increase in GIDC through the GIDC Act, 2011, the GIDC
Ordinance, 2014 and the GIDC Act, 2015. The Honorable Sindh High Court has
issued stay against recovery of the GIDC under the GIDC Act, 2011, the GIDC
Ordinance, 2014 and the GIDC Act, 2015, hence the Company has not paid GIDC
under the above referred laws.

Page 57
GATRON

Considering previous decision of Honorable Supreme Court and legal advisor opinion,
the Company is confident that amount of the enhanced GIDC on industrial
consumers, from July 2012 to June 2014 amounting to Rs. 25.444 million will no
more be payable so the same has been reversed in these financial statements as referred
in note 30. Further, as the Company is confident that the case will be decided in
favor of the Appellants, total amount of enhanced GIDC upto June 30, 2015 worked
out at Rs. 48.456 million (2014: 25.444 million), however Company has provided
Rs. 7.975 million pertaining to the period of July 2014 to June 2015 for Captive
Power and June 2015 for Industrial as an abundant precaution and remaining amount
of Rs. 40.481 million has not been provided in these financial statements, in view of
reason stated above.

24.2 Guarantee

Bank guarantees and Letters of Credit issued by the banks on behalf of the Company in
favour of:
(Pak Rupees in Thousand)
Notes 2015 2014
The Director Excise & Taxation, Karachi 89,865 74,865
The Electric Inspector, President
Licencing Board, Quetta 10 10
Sui Southern Gas Company for Gas - Letters of Credit 30,992 30,992
120,867 105,867

24.3 Commitments

The Companys commitments, against which the banks have opened Letters of Credit,
in favor of different suppliers, are as follows:

Foreign currency:
Property, plant and equipment 236,834 104,555
Raw material 176,935 243,838
Spare parts and others 41,058 32,961
454,827 381,354
Local currency:
Raw material - 101,183
454,827 482,537

25 SALES

Gross local sales 10,483,210 12,100,068


Third party processing charges 76,318 54,995
10,559,528 12,155,063
Less: Sales tax 25.1 623,830 687,593
Local sales 9,935,698 11,467,470
Export sales 339,583 296,229
10,275,281 11,763,699

25.1 These include local reduced rate supplies.

Page 58
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

26 COST OF SALES

Raw material consumed 6,969,154 7,558,228


Stores, spare parts and loose tools consumed 186,840 174,857
Outsource processing charges 240,071 159,127
Salaries, wages, allowances and benefits 26.1 835,975 745,992
Power, fuel and gas 1,822,956 1,760,435
Rent, rates and taxes 2,925 2,632
Insurance 33,855 32,146
Cartage & Transportation 107,261 112,111
Repairs and maintenance 79,356 82,061
Communications & Computer expenses 1,760 1,603
Water supply 33,209 12,181
Travelling 2,254 2,479
Legal and professional fees 3,049 4,640
Sundry 15,903 26,260
Depreciation 4.2 286,443 266,557
10,621,011 10,941,309
Duty draw back (152) (129)
Scrap sales 26.2 (26,839) (16,854)
10,594,020 10,924,326
Opening stock of goods-in-process 628,472 747,624
Closing stock of goods-in-process (779,088) (628,472)
Cost of goods manufactured 10,443,404 11,043,478
Opening stock of finished goods 966,009 1,105,595
Closing stock of finished goods (1,170,397) (966,009)
10,239,016 11,183,064

26.1 These include Rs.16.485 million (2014 : Rs.14.471 million) and Rs.13.050 million (2014 :
Rs.9.130 million) representing contribution to defined contribution plan by the Company
and expenditure on defined benefit plan respectively.

26.2 Net off sales tax amounting to Rs.1.356 million (2014: Rs.2.359 million)

27 DISTRIBUTION AND SELLING EXPENSES

Salaries, allowances and benefits 27.1 35,421 29,930


Insurance 3,989 3,866
Rent, rates and taxes 624 990
Handling, freight and transportation 182,167 168,869
Advertisement and sales promotion 844 914
Communications 291 263
Travelling 1,319 1,114
Fee & subscriptions 426 366
Sundry 8,276 30,885
Depreciation 4.2 943 1,051
234,300 238,248

Page 59
GATRON

27.1 These include Rs.0.827 million (2014 : Rs.0.827 million) and Rs.5.407 million (2014 :
Rs.3.887 million) representing contribution to defined contribution plan by the Company
and expenditure on defined benefit plan respectively.

(Pak Rupees in Thousand)


Notes 2015 2014

28 ADMINISTRATIVE EXPENSES

Salaries, allowances and benefits 28.1 164,826 132,124


Rent, rates and taxes 45,218 45,220
Insurance 1,412 1,272
Repairs and maintenance 10,695 8,665
Travelling 5,554 5,303
Communications 3,073 2,407
Legal and professional fees 4,765 16,562
Utilities 8,800 6,429
Printing and stationery 2,322 2,278
Transportation 3,767 3,899
Sundry 10,867 6,049
Depreciation 4.2 6,801 6,333
268,100 236,541

28.1 These include Rs.4.772 million (2014 : Rs.4.660 million) and Rs.22.104 million (2014 :
Rs.12.056 million) representing contribution to defined contribution plan by the Company
and expenditure on defined benefit plan respectively.

29 OTHER OPERATING EXPENSES

Loss on disposal of property, plant and equipment 102 99


Provision for doubtful trade debts - net 10.2 8,099 36,129
Provision for slow moving stores, spare parts
and loose tools - net 8.1 11,092 2,436
Impairment in long term investments 5.4 115 73
Exchange loss - net 7,769 -
Corporate social responsibilities 29.1 14,442 21,434
Workers' Welfare Fund 1,202 3,256
Auditors' remuneration 29.2 1,218 1,121
44,039 64,548

29.1 These include donation of Rs.10.850 million (2014: Rs.8.546 million) to Messrs. Gatron
Foundation in which Chief Executive and six directors of the Company are governors.
None of the directors or their spouses has any interest in any donee fund, in so far as
other donations are concerned.

Page 60
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


2015 2014

29.2 Auditors' remuneration


Audit fee - Annual accounts 1,000 1,000
Limited review, audit of consolidated financial
statements, provident funds and certification fee 70 63
Sindh sales tax on services 64 -
Out of pocket expenses 84 58
1,218 1,121

30 OTHER INCOME

Income from non -financial assets


Storage and handling income 439 439
Gain on disposal of property, plant and equipment 4,645 8,557
5,084 8,996

Others
Liabilities no more payable written back 3,630 3,457
Exchange gain - net - 1,615
Reversal of provision for Gas Infrastructure
Development Cess 25,444 -
Insurance claim received 24,422 -
Miscellaneous income 248 235
53,744 5,307
58,828 14,303

31 FINANCE COST

Mark up on short term borrowings 103,283 116,743


Bank charges 1,621 1,804
104,904 118,547

32 INVESTMENT INCOME - DIVIDEND

Dividend income from wholly owned subsidiary -


M/s. Gatro Power (Private) Limited 361,200 225,750
Dividend income from associated company -
M/s. Novatex Limited 255,150 -
616,350 225,750

33 INCOME TAX

For the current year 89,392 74,285


For the prior year (59,451) -
29,941 74,285
Deferred
(58,752) (57,237)
(28,811) 17,048

Page 61
GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

Relationship between income tax and profit before income tax :

Profit before income tax 60,100 162,804

Income tax rate 33% 34%

Income tax on profit before income tax 19,833 55,353

Tax effect of:


permanent differences (119,196) (76,755)
minimum tax 99,357 114,675
tax credits (39,066) (43,294)
income assessed under final tax regime (59,465) (3,547)
change in statutory tax rate for next year (5,021) (6,649)
others 134,198 (22,735)
prior year reversal for income tax (59,451) -
Income tax for the year (28,811) 17,048

34 EARNINGS PER SHARE - Basic and diluted

Profit after income tax 88,911 145,756

( Number of Shares )

Number of Ordinary shares 38,364,480 38,364,480

Rupees Rupees

Earnings per share - Basic and diluted 2.32 3.80

There is no dilutive effect on the basic earnings per share of the Company.

35 CASH AND CASH EQUIVALENTS

Cash and bank balances 15 79,140 103,971


Short term borrowings 22 (762,879) (1,387,334)
(683,739) (1,283,363)

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Annual Report of Gatron (Industries) Limited 2015

36 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

FINANCIAL ASSETS AND LIABILITIES

(Pak Rupees in Thousand)


Interest/mark-up bearing Non-Interest/mark-up bearing

Maturity Maturity Maturity Maturity 2015 2014


Sub Sub Total Total
upto after one upto after one
Total Total
one year year one year year

Financial Assets
Long term investments - - - - 597,642 597,642 597,642 597,769
Loans and advances - - - 7,567 804 8,371 8,371 4,532
Deposits - - - 220 1,669 1,889 1,889 5,427
Trade debts - - - 767,713 - 767,713 767,713 1,088,765
Other receivables - - - 27,620 - 27,620 27,620 173,933
Cash and bank balances - - - 79,140 - 79,140 79,140 103,971
- - - 882,260 600,115 1,482,375 1,482,375 1,974,397
Financial Liabilities
Trade and other payables - - - 1,388,490 - 1,388,490 1388490 835,457
Accrued mark up - - - 16,789 - 16,789 16,789 25,880
Short term borrowings 762,879 - 762,879 - - - 762,879 1,387,334
762,879 - 762,879 1,405,279 - 1,405,279 2,168,158 2,248,671

The effective interest/markup rates for the monetary financial assets and liabilities are mentioned
in respective notes to the financial statements.

36.1 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying value of all financial assets and liabilities reflected in the financial statements
approximate at their fair value except Long term investments which are carried at cost.

36.2 FINANCIAL RISK MANAGEMENT OBJECTIVES

The Company exposed to a variety of financial risks: market risk (including currency
risk, interest rate risk and other price risk), credit risk and liquidity risk. The Company's
overall risk management programme focusses on the unpredictability of financial markets
and seeks to minimize potential adverse effects on the financial performance.

Risk Management is carried out under policies and principles approved by the Board.
All treasury related transactions are carried out within the parameters of these policies
and principles.

Page 63
GATRON

A Market Risk

i Foreign exchange risk

Foreign exchange risk represents the risk that the fair value of future cash flows of a
financial instruments will fluctuate because of changes in foreign exchange rates. Foreign
exchange risks arises mainly from future economic transactions or receivables and payables
that exist due to transactions in foreign currencies.

The Company is exposed to foreign exchange risk arising from currency value fluctuations,
primarily with respect to the USD, Euro, AED, JPY and CHF. The Company's exposure
to foreign currency risk is as follows:

(Pak Rupees in Thousand)


2015 2014
Bills Payable 384,315 481,580
Finance under F.E. Circular No.25 of SBP 137,367 -
521,682 481,580

Trade Debts (86,388) (74,432)


Receivable from suppliers (11,394) (168,259)
Foreign currency bank accounts (963) (767)
(98,745) (243,458)
422,937 238,122
Commitments - Outstanding letters of credit 454,827 381,354
Net exposure 877,764 619,476

The following significant exchange rates have been applied


Average rate Reporting date rate
2015 2014 2015 2014
Rupees
USD to PKR 101.21 102.90 101.70 98.75
Euro to PKR 121.39 139.93 113.79 134.73
AED to PKR 27.51 28.02 27.64 26.89
JPY to PKR 0.93 1.02 0.83 0.97
CHF to PKR - 114.24 - 110.82
At reporting date, if the PKR had strengthened/weakened by 10% against the USD, Euro,
AED, JPY and CHF with all other variables held constant, pre tax profit for the year
would have been higher/lower by the amount shown below, mainly as a result of net
foreign exchange gain or net foreign currency exposure at reporting date.

Average rate Reporting date rate


2015 2014 2015 2014
(Pak Rupees in Thousand)
Effect on profit & loss account
USD to PKR 72,922 53,198 73,279 51,095
Euro to PKR 21,988 12,903 20,611 12,424
AED to PKR (6,260) (2,361) (6,290) (2,261)
JPY to PKR 198 346 176 331
CHF to PKR - 369 - 358
88,848 64,455 87,776 61,947

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for
the year and assets / liabilities of the Company.

Page 64
Annual Report of Gatron (Industries) Limited 2015

ii Price risk

Price risk represents the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices (other than those arising from interest
or currency rate risk), whether those changes are caused by factors specific to the individual
financial instrument or its issuer, or factors affecting all similar financial instruments
traded in the market.

The Company is not exposed to equity price risk since there are no investment in listed
equity securities.

iii Interest / Markup rate risk

Interest / Markup rate risk arises from the possibility of changes in Interest/Markup rates
which may effect the value of financial instruments. The Company has short term
borrowings at variable rates. At the balance sheet date the Interest/Markup profile of the
Company's Interest/Markup-bearing financial instrument is:

(Pak Rupees in Thousand)


2015 2014 2015 2014
Effective rate (in %) Carrying amount
Financial Liabilities
Variable rate instruments
Short term borrowings 5.99 - 10.37 8.77 - 10.46 762,879 1,387,334

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have
decreased / (increased) profit for the year by the amounts shown below. This analysis
assumes that all other variable, in particular foreign currency rates, remain constant. This
analysis is performed on the same basis for 2014.

Profit and loss


100 bp 100 bp
increase decrease
As at June 30, 2015
Cash flow sensitivity - Variable rate financial liabilities (7,629) 7,629

As at June 30, 2014


Cash flow sensitivity - Variable rate financial liabilities (13,873) 13,873

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for
the year and assets / liabilities of the Company.

B Credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date
if counter parties failed completely to perform as contracted. The Company manages
credit risk interalia by setting credit limits in relation to individual customers and by
obtaining advance against sales and also obtains collaterals, where considered necessary.
The Company has established an allowance for the doubtful trade debts that represents
its estimate of incurred losses in respect of trade debts. Consequently, the Company
believes that it is not exposed to any major concentration of credit risk.

Page 65
GATRON

Exposure to credit risk

The carrying amount of the financial assets represent the maximum credit exposure before
any credit enhancements. Out of total financial assets of Rs.1,482.375 million (2014 :
Rs.1,974.397 million), the financial assets which are subject to credit risk amounted to
Rs.883.166 million (2014: Rs.1,375.024 million). The carrying amounts of financial assets
exposed to credit risk at reporting date are as under:

(Pak Rupees in Thousand)


2015 2014
Loans and advances 8,371 4,532
Deposits 1,889 5,427

Trade debts 767,713 1,088,765


Other receivables 27,620 173,933
795,333 1,262,698
Bank balances 77,573 102,367
883,166 1,375,024

The aging of trade debts and other receivables at the reporting date

Not past due 544,254 895,197


Past due 1-30 days 71,010 75,418
Past due 31-90 days 140,485 165,625
Past due 91-180 days 34,967 69,315
Past due 180 days 72,592 117,589
863,308 1,323,144
Provision for doubtful debts (67,975) (60,446)
795,333 1,262,698

The credit quality of Company's bank balances can be assessed with reference to external
credit rating as follows:

Rating Rating
Bank Agency Short term Long term

Bank Al-Falah Limited PACRA A1+ AA


Bank Al-Habib Limited PACRA A1+ AA+
Dubai Islamic Bank Pakistan Limited JCR-VIS A-1 A+
Faysal Bank Limited PACRA A1+ AA
Habib Bank Limited JCR-VIS A-1+ AAA
Habib Metropolitan Bank Limited PACRA A1+ AA+
JS Bank Limited PACRA A1+ A+
MCB Bank Limited PACRA A1+ AAA
Meezan Bank Limited JCR-VIS A-1+ AA
National Bank of Pakistan PACRA A1+ AAA
NIB Bank Limited PACRA A1+ AA-
Samba Bank Limited JCR-VIS A-1 AA
Standard Chartered Bank (Pakistan) Limited PACRA A1+ AAA
United Bank Limited JCR-VIS A-1+ AA+

Page 66
Annual Report of Gatron (Industries) Limited 2015

C Liquidity risk

Liquidity risk represents where an entity will encounter difficulty in meeting obligations
associated with financial liabilities.

The Company manages liquidity risk by maintaining sufficient cash and ensuring the
fund availability through adequate credit facilities. At June 30, 2015, the Company has
Rs.4,605 million plus Rs.1,000 million swinging facility with Associate Company, available
borrowing limit from financial institutions. The Company has unutilised borrowing
facilities of Rs.3,901 million in addition to balances at banks of Rs.78 million. Based on
the above, management believes the liquidity risk to be insignificant. The following are
the contractual maturities of financial liabilities, including interest/mark-up payments.

Carrying Contractual Six months Beyond six


Amount Cash Flow or less months
----------------------------- (Pak Rupees in Thousand) ----------------------------
2015
Trade and other payables 1,388,490 1,388,490 1,388,490 -
Accrued mark up 16,789 16,789 16,789 -
Short term borrowings 762,879 763,337 763,337 -
2,168,158 2,168,616 2,168,616 -

2014
Trade and other payables 835,457 835,457 835,457 -
Accrued mark up 25,880 25,880 25,880 -
Short term borrowings 1,387,334 1,387,334 1,387,334 -
2,248,671 2,248,671 2,248,671 -

36.3 CAPITAL RISK MANAGEMENT

The Company's objectives in managing capital is to ensure the Company's ability to


continue as a going concern so that it can continue to provide returns to shareholders
and benefit for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.

The gearing ratio as at June 30, 2015 and 2014 were as follows:

(Pak Rupees in Thousand)


2015 2014

Total borrowings 762,879 1,387,334


Cash and bank balances (79,140) (103,971)
Net debt 683,739 1,283,363
Total equity 3,645,990 3,776,856
Total capital 4,329,729 5,060,219

Gearing ratio 16% 25%

The ratio is calculated as net debt divided by total capital. Net debt is calculated as total
borrowings less cash and bank balances. Total capital is calculated as 'equity' as shown
in the balance sheet plus net debt.

The Company finances its operations through equity, borrowings and management of
working capital with a view to maintaining an appropriate mix amongst various sources
of finance to minimize risk and cost.

Page 67
GATRON

37 REMUNERATION OF CHIEF EXECUTIVE,


DIRECTORS AND EXECUTIVES

The aggregate amount charged to profit and loss account for remuneration, including all benefits
to the Chief Executive, Directors and Executives of the Company are as follows:
(Pak Rupees in Thousand)
Chairman Chief Executive Directors Executives TOTAL
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Managerial
remuneration 10,016 - 15,558 14,189 21,780 24,597 117,928 97,040 165,282 135,826

Post employment
benefits - - 5,088 4,488 6,295 5,885 22,959 15,116 34,342 25,489

Utilities - - 99 88 68 152 34 31 201 271

Other benefits - - - - 2,245 2,166 56,077 48,374 58,322 50,540

10,016 - 20,745 18,765 30,388 32,800 196,998 160,561 258,147 212,126

Number of persons

for remuneration 1 - 1 1 3 4 75 65 80 70

37.1 Aggregate amount of meeting fee to Chairman and 3 non-executive Directors (2014:
3 non-executive Directors) was Rs.90 thousand (2014: Rs. 85 thousand).

37.2 In addition, the Chief Executive and working directors are provided with Company
maintained car and certain executives are provided with household furniture and cars
under Company policies, the monetary impact where of is not quantifiable.

37.3 An Associated Company reimbursed Rs.28.092 million (2014: Rs.22.024 million) in respect
of services provided by certain directors and executives during the year.

38 SEGMENT REPORTING

38.1 Reportable segments

The Company's reportable segments are as follows:

- Polyester Filament Yarn - it comprises manufacturing of Polyester Filament Yarn


and its raw material.

- Polyester PET Preforms - it comprises manufacturing of Polyester PET Preforms


and its raw material.

Other operating expenses, other income, finance cost, and taxation are managed at company
level.

Page 68
Annual Report of Gatron (Industries) Limited 2015

38.2 Segment results:

The segment information for the reportable segments for the year ended June 30, 2015
is as follows:
(Pak Rupees in Thousand)
June 2015 June 2014
Polyester Polyester Polyester Polyester
Filament PET Total Filament PET Total
Yarn Preforms Yarn Preforms
Sales 7,372,281 2,903,000 10,275,281 8,729,689 3,034,010 11,763,699
Segment result (557,384) 91,249 (466,135) (84,604) 190,450 105,846

Reconciliation of segment results with profit before income tax:


Total results for reportable segments (466,135) 105,846
Other operating expenses (44,039) (64,548)
Other income 58,828 14,303
Finance cost (104,904) (118,547)
Investment income - Dividend 616,350 225,750
Profit before income tax 60,100 162,804

Assets and liabilities by segments are as follows:

Segment assets 3,872,519 1,370,291 5,242,810 4,234,083 1,269,740 5,503,823


Segment liabilities 439,503 124,710 564,213 334,761 116,076 450,837

Reconciliation of segments assets and liabilities with totals in the balance sheet is as follows:

Assets Liabilities Assets Liabilities


Total for reportable segments 5,242,810 564,213 5,503,823 450,837
Unallocated assets/liabilities 1,428,138 2,460,745 1,287,981 2,564,111
Total as per balance sheet 6,670,948 3,024,958 6,791,804 3,014,948

Other segment information is as follows:

Depreciation 218,698 75,489 294,187 198,652 75,289 273,941

Capital expenditures incurred during the year 280,234 49,432 329,666 306,334 18,543 324,877
Unallocated capital expenditure incurred
during the year 8,599 39,814
Total 338,265 364,691

38.3 96.70% (2014: 97.48%) out of total sales of the Company relates to customers in Pakistan.

38.4 All non-current assets of the Company as at June 30, 2015 are located in Pakistan.

38.5 The Company does not have transaction with any external customer which amount to
10 percent or more of the Company's revenue.

Page 69
GATRON

( Metric Tons )
2015 2014

39 PLANT CAPACITY AND ACTUAL PRODUCTION

39.1 Polyester Filament Yarn 39.1.1


Annual capacity 24,191 24,191
Actual production 37,028 39,434

39.2 Polyester P.E.T. Preforms 39.2.1


Annual capacity 27,606 27,606
Actual production 17,670 13,265

39.1.1 The capacity is determined based on 75 denier and 24 filament. Actual production
represents production of various deniers.

39.2.1 The capacity is determined based on 39 gms 12 months production. Actual


production represents production of various grammage. The actual production
versus annual capacity is lower on account of very low preform demand/production
in winter months of the year. The actual production of preforms (various
grammage) in pieces was 571.609 million (2014: 404.890 million) against annual
capacity (based on 39 gms) of 707.858 million pieces.

(Pak Rupees in Thousand)


2015 2014

40 TRANSACTIONS WITH RELATED PARTIES

During the year, details of transactions with related parties are as follows:

Subsidiary Companies Purchase of power 1,627,502 1,536,722


Investment in shares during the year - 210
Proceed received for voluntary
winding up of Subsidiary Company 12 -
Receipt of dividend 361,200 225,750
On account of rent/storage
& handling and reimbursement
of expenses 23,595 21,800

Associated Company Purchase / sale of services 305,305 206,131


Purchase of other material 716 566
Investment in shares during the year - 297,000
Receipt of dividend 255,150 -
On account of rent 44,890 44,890
On account of reimbursement
of expenses 48,488 42,075

Other Related Parties Payment of dividend 8,102 10,533


Charges on account of handling 5,612 5,128
Payment of donation 10,850 8,546

- The above figures are exclusive of sales tax, where applicable.


- Outstanding balances, as at balance sheet date, are disclosed in their respective notes.

Page 70
Annual Report of Gatron (Industries) Limited 2015

Transactions and outstanding balances, as applicable in relation to Defined Contribution


Plan (DCP) and Key Management Personnel (KMP) have been disclosed in notes 26.1,
27.1, 28.1 of DCP; 6.2 and 37 of KMP respectively. KMP are those persons having authority
and responsibility for planning, directing and controlling the activities of the entity directly
or indirectly. The Company considers its Chief Executive, Executive Directors and other
executives to be KMP.

(Pak Rupees in Thousand)


2015 2014

41 PROVIDENT FUND RELATED DISCLOSURES

The Following information is based on latest un-audited financial statements of the Funds.

Size of the Funds - Total Assets 366,302 322,239

Cost of Investments made 323,746 289,869

Fair Value of investments 363,170 319,269

Percentage of investments made (Fair value to size of the fund) 99.14% 99.08%

(Pak Rupees in Thousand)


2015 2014
Amount % Amount %

41.1 The Break-up of fair value of investments is:

Shares in Listed Companies 1 0.00% 1 0.00%


Government Securities 257,319 70.85% 239,530 75.03%
Debt Securities 10,448 2.88% 16,802 5.26%
Mutual Funds 51,558 14.20% 21,479 6.73%
Bank Deposits 43,844 12.07% 41,457 12.98%
363,170 100.00% 319,269 100.00%

41.2 The investments out of provident funds have been made in accordance with the provisions
of Section 227 of the Companies Ordinance, 1984 and the rules formulated for this
purpose.

42 NUMBER OF EMPLOYEES

The total average number of employees during the year and as at June 30, 2015 and 2014
respectively are as follows:

(Number of employees)
2015 2014

Average number of employees during the year 1,054 1,099

Number of employees as at June 30 1,011 1,074

Page 71
GATRON

43 NON ADJUSTING EVENT AFTER BALANCE SHEET DATE

The Board of Directors, in its meeting held on September 12, 2015, has recommended final cash
dividend of Rs.1.50 per share (2014: Rs.3.00 per share final cash dividend) This is in addition
to interim cash dividend of Rs.2.00 per share (2014: Rs.2.50 per share) already paid resulting a
total cash dividend for the year of Rs.3.50 per share (2014: Rs.5.50 per share). The approval of
the members for the final cash dividend will be obtained in the Annual General Meeting. Since
it is a non adjusting event, the financial statements for the year ended June 30, 2015 do not
include the effect of the recommended final cash dividend.

44 CORRESPONDING FIGURES

Prior year's figures have been reclassified for the purpose of better presentation. Significant
changes made during the year are as follows:

Reclassification from Reclassification to (Pak Rupees in


component component Thousand)

Trade and other payables Trade and other payables


Other liabilities Withholding taxes 7,331
Other liabilities Payable to Provident Fund Trusts 2,946

45 DATE OF AUTHORISATION FOR ISSUE

These financial statements were authorised for issue on September 12, 2015 by the Board of
Directors of the Company.

46 GENERAL

Figures have been rounded off to the nearest thousand of Pak Rupees.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 72
Annual Report of Gatron (Industries) Limited 2015

Pattern of Shareholding
AS ON JUNE 30, 2015

Serial No. of Shareholding Total


No. Shareholders From To Shares Held
1 305 1 100 17,275
2 647 101 500 299,443
3 240 501 1,000 156,501
4 74 1,001 5,000 146,890
5 7 5,001 10,000 47,888
6 3 10,001 15,000 36,114
7 1 15,001 20,000 15,100
8 2 20,001 25,000 44,840
9 2 65,001 70,000 137,719
10 3 110,001 115,000 345,000
11 2 130,001 135,000 266,000
12 1 190,001 195,000 190,504
13 1 215,001 220,000 217,320
14 1 225,001 230,000 229,880
15 1 285,001 290,000 287,750
16 1 350,001 355,000 350,414
17 1 470,001 475,000 470,117
18 1 580,001 585,000 581,921
19 2 630,001 635,000 1,263,302
20 1 660,001 665,000 664,950
21 1 670,001 675,000 671,451
22 1 970,001 975,000 973,000
23 1 1,025,001 1,030,000 1,027,700
24 1 1,170,001 1,175,000 1,172,422
25 1 1,255,001 1,260,000 1,259,067
26 1 1,520,001 1,525,000 1,520,565
27 1 1,600,001 1,605,000 1,602,920
28 1 1,615,001 1,620,000 1,619,624
29 1 1,620,001 1,625,000 1,620,387
30 2 2,045,001 2,050,000 4,093,397
31 1 2,240,001 2,245,000 2,240,195
32 1 2,280,001 2,285,000 2,281,100
33 1 2,795,001 2,800,000 2,796,884
34 1 2,805,001 2,810,000 2,808,070
35 1 3,445,001 3,450,000 3,445,400
36 1 3,460,001 3,465,000 3,463,370
Total 1,313 38,364,480

Shareholders No. of Shares Holding


Categories Shareholders Held Percentage
Individuals 1,296 25,551,552 66.60
Joint Stock Companies 9 3,229,058 8.42
Financial Institutions 3 3,430 0.01
Insurance Companies 1 200 0.00
Investment Companies 4 9,580,240 24.97

Total 1,313 38,364,480 100.00

Page 73
GATRON

Detail of Pattern of Shareholding

Shares Held
Associated Company

M/s. Gani & Tayub (Private) Limited 1,620,387

Mutual Funds None

NIT 3,050

Directors and their spouse(s) and minor children

Haji Haroon Bilwani 2,240,195


Mr. Peer Mohammad Diwan 2,796,884
Mr. Abdul Razak Diwan 3,445,400
Mr. Zakaria Bilwani 1,620,624
Mr. Usman Bilwani 2,048,048
Mr. Iqbal Bilwani 1,260,067
Mr. Shabbir Diwan 421,414
Mr. Muhammad Taufiq Bilwani 119,200
Mr. Muhammad Waseem 500
Mst. Majida Haroon 230,880
Bai Amina 287,750
Mst. Razia Ahmed 639,803

Executives 2,643,914

Public Sector Companies, Corporations and


Joint Stock Companies 2,636,261

Banks, Development Finance Institutions,


Non-Banking Finance Companies,
Insurance Companies, Takaful, Mudarabas,
and Pension Funds. 8,553,230

Shareholders holding 5% or more

M/s. Eurobond Investments Limited 3,463,370


Mr. Abdul Razak Diwan 3,445,400
M/s. Ventures Asia LLC 2,808,070
Mr. Peer Mohammad Diwan 2,796,884
M/s. Treatbase Limited 2,630,620
M/s. Redwood Investments Ltd. 2,281,100
Haji Haroon Bilwani 2,240,195
Mr. Usman Bilwani 2,048,048
Mst. Zohra Hajiani 2,046,349

Trade in the shares of the company by directors,


executives, their spouse(s) and minor children Nil

Page 74
Consolidated
Financial Statements
GATRON

Directors Report
On behalf of the Board of Directors of M/s. Gatron (Industries) Limited, we are pleased to
present the audtied Consolidated Financial Statements of the Group for the year ended
June 30, 2015.

The Group
The Group comprises of Gatron (Industries) Limited and its subsidiaries i.e Gatro Power (Private)
Limited and Global Synthetics Limited.

Gatro Power (Private) Limited


During the period under review, operations of wholly owned subsidiary M/s. Gatro Power
(Private) Limited remained average. However, the profitability of the Company in forthcoming
period, will be affected due to newly promulgated Gas Infrastructure Development Cess Act
2015 dated May 22, 2015. The rate of GIDC will be @ Rs. 100 and Rs. 200 per MMBTU for
industrial user and captive power respectively with immediate effect. The Company has obtained
stay against the Act from the Honorable High Court of Sindh at Karachi. The profitability of
the Company will erode due to increase in gas tariff from Rs. 573.28 to Rs. 600 per MMBTU
(i.e. 4.66%) for captive power and from Rs. 488.23 to Rs. 600 per MMBTU (i.e. 22.89%) on
industrial user, effective from September 1, 2015. The Company has already declared / paid
interim cash dividend @ 120% and further declared final cash dividend @ 15% for the year ended
June 30, 2015.

Global Synthetics Limited has not yet commenced its operations till date.

During the year, another subsidiary M/s. GT Universal Limited has been voluntary wound up
as approved by members in its EOGM dated March 09, 2015.

Consolidated Financials
(Pak Rupees in Thousand)
Operating results for the year ended June 30, 2015
Loss before share of profit in associated company (9,681)
Share of profit after income tax in associated company 93,026
Profit before income tax 83,345
Income tax 352,410
Loss after income tax (269,065)

State of Affairs as on June 30, 2015


Property, plant and equipment 2,351,008
Other non-current assets 3,619,237
Current assets 4,392,765
Total assets 10,363,010

Deduct:
Non-current liabilities 786,385
Current liabilities 2,418,361
Total liabilities 3,204,746
Net assets financed by shareholders' equity 7,158,264

On behalf of the Board

Peer Mohammad Diwan


September 12, 2015 Chief Executive

Page 76
GATRON

Consolidated Balance Sheet


AS AT JUNE 30, 2015

(Pak Rupees in Thousand)


Notes 2015 2014
ASSETS
Non-current Assets

Property, plant and equipment 5 2,351,008 2,264,015


Long term investment 6 3,616,764 3,780,174
Long term loans 7 804 211
Long term deposits 8 1,669 1,671
5,970,245 6,046,071

Current Assets

Stores, spare parts and loose tools 9 598,900 666,645


Stock in trade 10 2,510,177 2,315,281
Trade debts 11 767,713 1,088,765
Loans and advances 12 46,126 37,988
Trade deposits and short term prepayments 13 12,197 109,480
Other receivables 14 168,180 213,030
Taxes refund due from Federal Government 15 198,044 102,390
Cash and bank balances 16 91,428 454,208
4,392,765 4,987,787

TOTAL ASSETS 10,363,010 11,033,858

EQUITY AND LIABILITIES


SHARE CAPITAL & RESERVES

Share capital 17 383,645 383,645


Capital reserves 18 458,645 458,645
General reserve 19 2,785,000 2,785,000
Unappropriated profit 3,530,974 4,021,207
7,158,264 7,648,497

LIABILITIES
Non-current Liabilities

Deferred liabilities 20 786,385 400,852

Current Liabilities

Trade and other payables 21 1,575,626 1,543,559


Accrued mark up 22 16,789 25,880
Short term borrowings 23 762,879 1,387,334
Provision for income tax less payments 24 63,067 27,736
2,418,361 2,984,509

CONTINGENCIES AND COMMITMENTS 25

TOTAL EQUITY AND LIABILITIES 10,363,010 11,033,858

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive
Conversion rates as at June 30, 2015 were 1 US$ = Rs. 101.70, 1 Euro = Rs. 113.79 and 1 Pound = Rs. 159.91

Page 78
Annual Report of Gatron (Industries) Limited 2015

Consolidated Profit And Loss Account


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


Notes 2015 2014
(Restated)

Sales 26 9,998,606 11,502,456


Cost of sales 27 9,552,725 10,547,026
Gross profit 445,881 955,430
Distribution and selling expenses 28 234,300 238,248
Administrative expenses 29 270,204 237,795
Other operating expenses 30 56,293 74,914
560,797 550,957
(114,916) 404,473
Other income 31 210,550 14,452
Operating profit 95,634 418,925
Finance cost 32 105,315 118,966
(9,681) 299,959
Share of profit after income tax in associated company 93,026 319,491
Profit before income tax 83,345 619,450
Income tax - Current and Prior 29,941 74,285
Deferred 322,469 (57,237)
33 352,410 17,048
(Loss) / Profit after income tax (269,065) 602,402

(Loss) / Earnings per share - Basic and diluted ( Rupees ) 34 (7.01) 15.70

(1) The Board of Directors of Parent Company has recommended final cash dividend for the year
ended June 30, 2015 of Rs.1.50 per share (i.e.15%). This is in addition to interim cash dividend
of Rs.2.00 per share (i.e. 20%) refer note 43.

(2) The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 79
GATRON

Consolidated Statement Of Comprehensive Income


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


2015 2014
Restated
(Loss) / Profit after income tax (269,065) 602,402

Other comprehensive income

Items that will never be reclassified to profit or loss


Remeasurement of defined benefit liability having nil tax impact (28,060) (11,307)
Share of other comprehensive income of associates-net of tax - 272

Items that may be reclassified subsequently to profit or loss


Share of other comprehensive loss of associates-net of tax (1,286) -

Total comprehensive (loss) / income (298,411) 591,367

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 80
Annual Report of Gatron (Industries) Limited 2015

Consolidated Cash Flow Statement


for The Year Ended June 30, 2015

(Pak Rupees in Thousand)


Note 2015 2014
Cash Flow from / (towards) Operating Activities
Profit before income tax 83,345 619,450
Adjustments for:
Depreciation 368,387 325,391
Provision for defined benefit plan 40,683 25,114
Gain on disposal of property, plant and equipment (4,645) (8,557)
Loss on disposal of property, plant and equipment 102 99
Provision for doubtful trade debts-net 8,099 36,129
Provision for slow moving stores, spare parts and loose tools-net 12,295 2,697
Reversal of provision for Gas Infrastructure Development Cess (177,611) -
Share of profit in associated company (93,026) (319,491)
Finance cost 105,315 118,966
259,599 180,348
342,944 799,798
Decrease / (increase) in current assets:
Stores, spare parts and loose tools 55,450 (31,012)
Stock in trade (194,896) 329,504
Trade debts 312,953 30,795
Loans and advances (5,153) 8,246
Trade deposits and short term prepayments 97,283 (65,285)
Other receivables 44,850 27,009
Taxes refund due from Federal Government (16,320) 10,356
294,167 309,613
Increase / (decrease) in Trade and other payables 179,131 (133,282)
Cash flow from operations 816,242 976,129

(Payments for) / receipts of:


Long term loans (3,578) 569
Long term deposits 2 (420)
Defined benefit plan (5,679) (4,583)
Finance cost (114,406) (112,851)
Income tax (73,944) (52,334)
Net cash flow from operating activities 618,637 806,510

Cash Flow (towards) / from Investing Activities


Additions in property, plant and equipment (460,016) (387,790)
Proceeds from disposal of property, plant and equipment 9,206 20,731
Dividend received from associated company 255,150 -
Increase in long term investment - (297,000)
Net cash flow towards investing activities (195,660) (664,059)

Cash Flow (towards) / from Financing Activities


Dividend paid (161,302) (248,225)
Net cash flow towards financing activities (161,302) (248,225)
Net increase / (decrease) in cash and cash equivalents 261,675 (105,774)
Cash and cash equivalents at the beginning (933,126) (827,352)
Cash and cash equivalents at the end 35 (671,451) (933,126)

The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 81
GATRON

Consolidated Statement Of Changes In Equity


FOR THE YEAR ENDED JUNE 30, 2015

(Pak Rupees in Thousand)


Capital Reserves
Share Share General Unappropriated Total
Sub
Capital Premium Others Total reserve profit

Balances as at July 01, 2013 383,645 383,645 75,000 458,645 2,785,000 3,679,209 7,306,499

Total comprehensive income


for the year ended June 30, 2014 - - - - - 591,367 591,367

Transactions with owners

Final cash dividend for the year


ended June 30, 2013 at Rs.4.00
per share i.e. @ 40% - - - - - (153,458) (153,458)

Interim cash dividend for the


year ended June 30, 2014 at
Rs.2.50 per share i.e. @ 25% - - - - - (95,911) (95,911)

- - - - - (249,369) (249,369)

Balances as at June 30, 2014 383,645 383,645 75,000 458,645 2,785,000 4,021,207 7,648,497

Total comprehensive loss


for the year ended June 30, 2015 - - - - - (298,411) (298,411)

Transactions with owners

Final cash dividend for the year


ended June 30, 2014 at Rs.3.00
per share i.e. @30% - - - - - (115,093) (115,093)

Interim cash dividend for the year


ended June 30, 2015 at Rs.2.00
per share i.e. @20% - - - - - (76,729) (76,729)
- - - - - (191,822) (191,822)

Balances as at June 30, 2015 383,645 383,645 75,000 458,645 2,785,000 3,530,974 7,158,264

(1) Included in un-appropriated profit, is a sum of Rs 3,049.764 million, representing proportionate


share in un-appropriated profits of associated company upto March 31, 2015, which is not available
for distribution to the shareholder of the Parent Company, until realised.

(2) The notes 1 to 46 annexed herewith form an integral part of these financial statements.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 82
Annual Report of Gatron (Industries) Limited 2015

Notes To The Consolidated Financial Statements


FOR THE YEAR ENDED JUNE 30, 2015

1 THE GROUP AND ITS OPERATIONS

The Group consists of :

Gatron (Industries) Limited


Gatro Power (Private) Limited
Global Synthetics Limited

The Company was incorporated in Pakistan in 1980 as a Public Limited Company and its shares
are being quoted at all the Stock Exchanges of Pakistan since 1992. The registered office of the
Company is situated at Room No. 32, 1st floor, Ahmed Complex, Jinnah Road, Quetta. The
principal business of the Company is manufacturing of Polyester Filament Yarn alongwith its
raw material viz. Yarn Grade Polyester Chips. However, the Company also produces other
varieties of Polyester Chips viz Bottle Grade as well as PET Preforms.

Gatro Power (Private) Limited is a wholly owned Subsidiary of Gatron (Industries) Limited.
The principal business of the Company is to generate and sales electric power.

Global Synthetics Limited is a wholly owned subsidiary of Gatron (Industries) Limited, which
has yet to commence its operations.

GT Universal Limited, for which the Members of the G.T Universal Limited in the Extra
Ordinary General Meeting held on March 09, 2015, had resolved for voluntary winding up. All
requirements for voluntary winding up have been completed and now the said subsidiary stands
dissolved w.e.f. June 09, 2015.

2 BASIS OF CONSOLIDATION

The consolidated financial statements include the financial statements of Gatron (Industries)
Limited, Gatro Power (Private) Limited and Global Synthetics Limited. The financial statements
of the parent and subsidiary companies are prepared upto the same reporting date using consistent
accounting policies. Assets and liabilities of the subsidiaries have been consolidated on line by
line basis and the carrying value of investment held by holding company is eliminated against
the subsidiaries share capital intra Group balances and transactions are eliminated.

3 BASIS OF PREPARATION

3.1 Statement of compliance

These financial statements have been prepared in accordance with the approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such
International Financial Reporting Standards (IFRSs) issued by the International Accounting
Standards Board as are notified under the Companies Ordinance, 1984, provisions of and
directives issued under the Companies Ordinance, 1984. In case the requirements differ,
the provisions or directives of the Companies Ordinance, 1984 shall prevail.

3.2 Changes in accounting standards, interpretations and pronouncements

a) Standards, interpretations and amendments to published approved accounting


standards that became effective during the year

The following Standards, interpretations and amendments to published approved


accounting standards became effective during the year.

IAS - 19 Employee Benefits - Amendment


IAS - 32 Financial Instrument: Presentation - Amendment
IAS - 36 Impairment of Assets - Amendment
IAS - 39 Financial Instrument: Recognition and Measurement - Amendment
IFRIC - 21 Levies

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GATRON

These Standards, interpretations and amendments are not expected to have significant
impact on Group's financial statements. In addition to above, certain new cycle of
improvements are applicable in current year, are either considered not to be relevant
or are not expected to have significant impact to the Group's financial statements
and hence have not been specified.

b ) Standards, interpretations and amendments to published approved accounting


standards that are not yet effective

The following Standards, interpretations and amendments to published approved


accounting standards that are effective for accounting periods, beginning on or after
the date mentioned against each to them.

Effective for the period


beginning on or after

IAS -16 Property, Plant and Equipment - Amendment January 01, 2016
IAS - 27 Separate Financial Statements - Amendment January 01, 2016
IAS - 38 Intangible Assets - Amendment January 01, 2016
IAS - 41 Agriculture - Amendment January 01, 2016
IFRS- 9 Financial Instruments: Classification and Measurement January 01, 2015
IFRS - 10 Consolidated Financial Statements - Amendment January 01, 2016
IFRS - 11 Joint Agreements - Amendment January 01, 2016
IFRS - 12 Disclosure of Interests in Other Entities - Amendment January 01, 2016

These standards, interpretations and the amendments are either not relevant to or
are not expected to have significant impact on the Group's financial statements other
than certain disclosures, if applicable.

In addition to above, certain new cycle of improvements will apply prospectively


for period beginning on or after 01, July 2015, are either considered not to be relevant
or are not expected to have significant impact to the Group's financial statements
and hence have not been detailed. .

c) New Standards issued by IASB and notified by SECP but not yet effective

Following new standards issued by IASB have been adopted by the Securities and
Exchange Commission of Pakistan for the purpose of applicability in Pakistan
through SRO 633(1) / 2014 dated July 10, 2014 and will be effective for annual periods
beginning on or after January 01, 2015.

IFRS-10 Consolidated Financial Statements


IFRS-11 Joint Arrangements
IFRS-12 Disclosure of Interest in Other Entities
IFRS-13 Fair Value Measurement

These new standards are either irrelevant or will not have any significant effect on
the Groups financial statements except IFRS 10, which is briefly described below:

IFRS-10 Consolidated Financial Statements

This is a new standard that replaces the consolidation requirements in SIC - 12


Consolidation: Special Purpose Entities and IAS 27 - Consolidated and Separate
Financial Statements. The proposed standard builds on existing principles by identifying
the concept of control as the determining factor in whether an entity should be
included within the consolidated financial statements of the Parent Company and
provides additional guidance to assist in the determination of control where this is
difficult to assess.

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Annual Report of Gatron (Industries) Limited 2015

3.3 Basis of measurement

These financial statements have been prepared under the historical cost convention except
otherwise specifically stated in note 4.

3.4 Significant Accounting Estimates and Judgments

The preparation of financial statements requires management to make judgments, estimates


and assumptions that have an effect on the application of policies and reported amounts
of assets, liabilities, income and expenses. The estimates and associated assumptions are
based on experience and various other factors that, in the considered opinion of the
management, are reasonable, under the circumstances, the results whereof provide the
basis of making judgment in relation to carrying value of assets and liabilities that are not
readily measurable, using other means. The definitive impact of ultimate outcome, may
fluctuate from these estimates.

The estimates and underlying assumptions are periodically appraised. Revision to accounting
estimates is recognized and effect is given in the period in which estimates are revised, or
in the period of the revision and future periods as appropriate.

Judgments made by management that have significant effect on the financial statements
and estimates with a significant probability of material adjustment in future are disclosed
hereunder:

a) Property, plant and equipment


The Group's management reviews the estimated useful lives and related depreciation
charge for its property, plant and equipment on each financial year end. The Group
reviews the value of the assets for possible impairment on each financial year end.
Any change in the estimate in future years might affect the carrying amounts of the
respective items of property, plant and equipment with a corresponding effect on
the depreciation, impairment and deferred tax.

b) Trade debts
The estimates of doubtful trade debts, are made, using and appropriately judging the
relevant inputs and applying parameters as stated in note 4.6, as the management
considers appropriate, which, on actual occurrence of the subsequent event, may
fluctuate. The effect of variation is recorded as and when it takes place.

c) Stock in trade
The Group reviews the net realisable value of stock-in-trade to assess any diminution
in the carrying values on each financial year end. Net realisable value is determined
with respect to estimated selling prices less estimated expenditure to make the sales.

d) Stores, spare parts and loose tools


The estimates of slow moving and obsolete stores, spare parts and loose tools, are
made, using and appropriately judging the relevant inputs and applying the parameter
i.e age analysis, as the management considers appropriate, which, on actual occurrence
of the subsequent event, may fluctuate. The effects of variation is recorded as and
when it takes place.

e) Defined benefit plan


The actuarial valuations of defined benefit plan, have been premised on certain
actuarial hypothesis, as disclosed in note 4.8 (b) to the financial statements. Changes
in assumptions in future years may affect the liability under this scheme upto those
years.

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f) Income tax

In making the estimate for income tax liabilities, the management considers current
income tax law and the decisions of appellate authorities. Deferred tax estimate is
made considering future applicable tax rate, as also stated disclosed in note 4.10 to
the financial statements.

g) Contingencies

The assessment of the contingencies inherently involves the exercise of significant


judgment as the outcome of the future events cannot be predicted with certainty.
The Company, based on the availability of the latest information, estimates the value
of contingent assets and liabilities which may differ on the occurrence/non-occurrence
of the uncertain future event(s).

3.5 Functional and reporting currency

These financial statements are presented in Pakistan Rupees, which is the Group's functional
currency.

4 SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are
set out below. These policies have been consistently applied throughout the year.

4.1 Property, plant and equipment

These are stated at cost less accumulated depreciation and impairment if any, except free-
hold land, lease-hold land and capital work in progress which are stated at cost. No
amortisation is provided on leasehold land since the leases are renewable at the option of
the lessee at nominal cost and their realisable values are expected to be higher than
respective carrying values. Depreciation is charged on diminishing balance method except
spare for major overhauling, which are depreciated at straight line method, at the rates
mentioned in Note 5.1, whereby the depreciable amount of an asset is written off over
its estimated useful life.

Depreciation on addition is charge from the month of the asset is available for use upto
the month prior to disposal.

Subsequent costs (including those on account of major repairs) are included in the asset's
carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future additional economic benefits associated with such additional cost will flow to
the Group and the cost of the item can be measured reliably. All other repairs and
maintenance incurred are taken to profit and loss account.

The carrying amounts of the Group's assets are reviewed at each financial year end whether
there is any indication of impairment. If such indication exists, the carrying amounts of
such assets are reviewed to assess whether they are recorded in excess of their respective
estimated recoverable amounts. Where estimated carrying amounts exceed the respective
recoverable amounts, the estimated carrying amounts are appropriately adjusted with
impairment loss recognised in profit and loss account for the year. The recoverable amount
is the higher of an asset's fair value less cost to sell and value in use. Fair value means the
amount for which an asset could be exchanged between knowledgeable and willing parties
in an arm's length transaction. Where an impairment loss is recognised, the depreciation
charge is adjusted in the future periods to allocate the asset's revised carrying amount over
its estimated useful life.

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Annual Report of Gatron (Industries) Limited 2015

Gain or loss on deletion of property, plant and equipment, if any, is taken to profit and
loss account.

4.2 Impairment of assets

Value of all Group's assets are reviewed at each financial year end to determine whether
there is objective evidence of impairment. If any such indication exists, the assets' recoverable
amount is estimated and carrying amounts are adjusted accordingly. Impairment losses
are recognised in the profit and loss account currently.

4.3 Investments

Associated Company

Investment in Associated Company is stated under Equity Method of accounting after


having initially recognised at cost. Gains and losses on transactions between the Group
and its associates are eliminated to the extent of the Group's interest in the associates
unless in case of losses the transaction provides evidence of an impairment of the assets
transferred.

4.4 Stores, spare parts and loose tools

These are valued at monthly weighted average cost. Items in transit are valued at cost
comprising of invoice value and other incidental charges incurred thereon till the balance
sheet date. Adequate provision is made for slow moving and obsolete items based on
parameter set out by the management as stated in note 3.4 (d). The major value spares and
stand by equipments are capitalized and depreciated according to their useful life.

4.5 Stock in trade

These are valued at lower of weighted average cost and net realisable value. The value of
goods in process and finished goods represents cost of direct materials plus applicable
labour and production overheads.

Net realisable value signifies the estimated selling price in the ordinary course of business
less the estimated costs necessary to make the sale.

Stock in transit is valued at cost comprising invoice value plus other incidental charges
incurred thereon upto the balance sheet date.

4.6 Trade debts

Trade debts are recognised at invoice value which is fair value of the good sold. Export
debtors are translated into Pak Rupee at the rate prevailing on the balance sheet date. A
provision for doubtful debt is established when there is objective evidence that the Parent
Company will not be able to collect amounts due according to the original terms of the
trade debts. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in making
payments are considered indicators that the trade debt is doubtful and the provision is
recognised in the profit and loss account. When a trade debt is uncollectible, it is written
off.

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4.7 Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents comprise cash and bank
balances and short term borrowings.

4.8 Employees' post employment benefits

a) Defined contribution plan

The Group and the eligible employees contribute equally to recognised provident
funds.

b) Defined benefit plan

The Group operates an unfunded defined gratuity scheme, being not mandatory
under the law, for its employees and working directors who attain the minimum
qualification period. The obligation is determined through actuarial valuation by
using the "Projected Unit Credit Method". The latest actuarial valuation is conducted
on the balances as at June 30, 2015.

4.9 Compensated unavailed leaves

The Group accounts for its estimated liability towards unavailed leaves accumulated by
employees on accrual basis.

4.10 Income Tax

Current

Parent Company accounts for liability for current income tax in accordance with income
tax law. The income tax on profit and loss account represents current provision after
adjustment, if any, to the provision for tax made in previous years, including those arising
from assessments and amendments in assessments during the year, for such years.

Profits and gains derived by the Subsidiary Company i.e. Gatro Power (Private) Limited
from electric power generation project are exempt from income tax under clause 132 of
Part-I of the Second Schedule to the Income Tax Ordinance, 2001.The Subsidiary Company
is also exempt from minimum tax on turnover under section 113 as per clause 11 (V) of
the Part-IV of Second Schedule to the Income Tax Ordinance, 2001.

Deferred

The Parent Company accounts for deferred income tax on all temporary timing differences
using the liability method. Deferred income tax assets are recognised to the extent, it is
probable that taxable profit will be available against which, the deductible temporary
differences, unused tax losses and tax credits, can be utilised.

Deferred tax is calculated at the rates that are expected to apply to the period when the
differences reverse, based on tax rates that have been enacted or substantively enacted by
the balance sheet date. In this regard, the effect on deferred taxation of the portion of
income expected to be subject to final tax regime is adjusted.

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Annual Report of Gatron (Industries) Limited 2015

Change in Estimates

Deferred tax liability in respect of investment in associate company accounted for on


equity method, had not been recognised as the associate was not likely to distributed
dividend in the foreseeable future. During the year, associated company distributed
dividend to its shareholders. Due to which the Company has changed its estimate to
account for its deferred tax liability on investment in associated company. This change
in accounting estimate has been applied prospectively in accordance with the treatment
specified in IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors".
Had this estimate not been changed, the loss for the year would have been lower by
Rs.381.221 million and the deferred tax liability would have been lower by Rs. 381.221million.

4.11 Trade and other payables

Trade and other payables are carried at cost, which is the fair value of the consideration
to be paid in future for goods and services.

4.12 Provision

Provision is recognised when the Group has present legal or constructive obligations as
result of past events, if it is probable that an outflow of resources will be required to settle
the obligation, and reliable estimate of the amounts can be made.

4.13 Borrowings and their cost

Borrowings are recorded as the proceeds received.

Borrowing costs are recognised as an expense in the period in which these are incurred
except to the extent of borrowing costs that are directly attributable to the acquisition,
construction, installation or production of a qualifying asset, where borrowing costs, if
any, are capitalised as part of the cost of that asset.

4.14 Foreign currency transactions and translation

Foreign currency transactions are recorded into Pak Rupee using the prevailing exchange
rates. As on balance sheet, monetary assets and liabilities in foreign currencies are translated
into Pak Rupees at the prevailing exchange rates on the balance sheet date. Resultant
exchange differences are taken to profit and loss account.

4.15 Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow
to the Parent Company and the revenue can be measured reliably. Revenue is measured
at the fair value of the consideration received or receivable. The revenue from diverse
sources is recognised as explained below:

- Sale and processing services are recognised on dispatch of goods to customer.

- Dividend income is recognised when the right of receipt is established.

- Storage and handling income is recognised on accrual basis after the receipt of material.

4.16 Dividend and appropriation to reserves

Liability for dividend and appropriation to reserve are recognised in the financial statements
in the period in which these are approved.

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GATRON

4.17 Financial instruments

All the financial assets and financial liabilities are recognised at the time when the Group
becomes a party to the contractual provisions of the financial instruments and derecognised
fully or partly when the Group fully or partly losses control of contractual rights that
comprise the financial assets and in the case of financial liabilities when the obligation
specified in the contract is fully or partly discharged, cancelled or expired. Any gain or
loss representing value differential if any on derecognition of the financial assets and
financial liabilities is taken to profit and loss account.

4.18 Offsetting of financial assets and financial liabilities

A financial asset and a financial liability is offset and the net amount is reported in the
balance sheet, if the Group has a legally enforceable right to set-off the recognised amounts
and the Group intends either to settle on a net basis or to realise the asset and discharge
the liability simultaneously.

4.19 Segment information

Operating segments are reported in a manner consistent with the internal reporting
structure. Management monitors the operating results of its business units separately for
the purpose of making decisions regarding resource allocation and performance assessment.

Segment results, assets and liabilities include items directly attributable to segment as well
as those that can be allocated on a reasonable basis.

Segment capital expenditure have the total cost incurred during the year to acquire
property, plant and equipment.

(Pak Rupees in Thousand)


Notes 2015 2014

5 PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets 5.1 2,292,206 2,223,728


Capital work in progress 5.4 58,802 40,287
2,351,008 2,264,015

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Annual Report of Gatron (Industries) Limited 2015

5.1 Operating fixed assets


Land Building Office Plant and Furniture Factory Office Motor Spares for Store and TOTAL
premises machinery and equipment equipment vehicles major spares held
Particulars Freehold Leasehold On On fixture overhauling for capital
freehold leasehold expenditure
land land
-------------------------------------------------------------------------------------- (Pak rupees in thousand) --------------------------------------------------------------------------------------
Net carrying value
Year ended June 30, 2015
Opening net book value 25,320 15,214 1,007 114,995 5,262 1,914,213 3,350 31,188 9,186 87,082 - 16,911 2,223,728
Additions at cost - - - - - 42,243 332 4,625 716 17,899 120,885 - 186,700
Transfer from capital work in progress - - - 2,438 - 249,362 - 2,968 60 - - - 254,828
Disposal at NBV - - - - - - - - 123 4,540 - - 4,663
Depreciation - - 101 11,743 526 296,668 704 7,259 2,429 19,199 27,335 2,423 368,387
Closing net book value 25,320 15,214 906 105,690 4,736 1,909,150 2,978 31,522 7,410 81,242 93,550 14,488 2,292,206

Gross carrying value


At June 30, 2015
Cost 25,320 15,214 14,248 434,469 9,902 7,211,916 18,191 75,512 59,065 165,049 120,885 21,557 8,171,328
Accumulated depreciation - - 13,342 328,779 5,166 5,302,766 15,213 43,990 51,655 83,807 27,335 7,069 5,879,122
Net book value 25,320 15,214 906 105,690 4,736 1,909,150 2,978 31,522 7,410 81,242 93,550 14,488 2,292,206

Net carrying value


Year ended June 30, 2014
Opening net book value 25,320 15,214 1,119 125,625 5,847 1,759,711 3,854 8,056 11,874 60,331 - 19,747 2,036,698
Additions at cost - - - - - 4,734 501 1,490 1,014 54,642 - - 62,381
Transfer from capital work in progress - - - 2,127 - 432,226 - 27,525 435 - - - 462,313
Disposal at NBV - - - - - 89 214 - 1,319 10,651 - - 12,273
Depreciation - - 112 12,757 585 282,369 791 5,883 2,818 17,240 - 2,836 325,391
Closing net book value 25,320 15,214 1,007 114,995 5,262 1,914,213 3,350 31,188 9,186 87,082 - 16,911 2,223,728

Gross carrying value


At June 30, 2014
Cost 25,320 15,214 14,248 432,031 9,902 6,920,311 17,859 67,919 58,704 161,786 - 21,557 7,744,851
Accumulated depreciation - - 13,241 317,036 4,640 5,006,098 14,509 36,731 49,518 74,704 - 4,646 5,521,123
Net book value 25,320 15,214 1,007 114,995 5,262 1,914,213 3,350 31,188 9,186 87,082 - 16,911 2,223,728

Depreciation rate
% per annum - - 10 10 10 10 to 25 20 20 20 to 30 20 14 to 29 10 to 15

5.2 Depreciation for the year has been allocated as follows:-

(Pak Rupees in Thousand)


Notes 2015 2014

Cost of sales 27 360,643 318,007


Distribution and Selling Expenses 28 943 1,051
Adminstrative Expenses 29 6,801 6,333
368,387 325,391

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5.3 Details of property, plant and equipment disposed off during the year :
(Pak Rupees in Thousand)
Description Cost Book Sale Mode of Particulars of Buyers
Value Proceeds Disposal
OFFICE EQUIPMENT
Gas Generator Kohler 415 123 28 Negotiation M/s. Pak Autos Mechanical Workshop
(14KVA) Korangi Crossing near Bhittai Colony, PAF Road,
Karachi.
Sub Total 415 123 28 -- --

MOTOR VEHICLES
Suzuki Cultus 677 142 507 Company Mr.Kafeel (Employee)
APL-940 Policy
Suzuki Cultus 814 224 520 --do-- Mr.Attique Ahmed (Employee)
ARM-053
Toyota Corolla 1,414 560 765 --do-- Mr.Muhammad Khaliq-uz-Zaman (Employee)
ATR-835
Toyota Corolla 1,389 404 690 --do-- Mr.Zubair Daud (Employee)
ARV-573
Toyota Corolla 1,389 396 865 --do-- Mr.Muhammad Iqbal (Employee)
ASA-355
Honda Civic 1,719 581 875 --do-- Mr.Abdul Ghaffar (Employee)
ASW-582
Toyota Corolla 849 53 590 --do-- Mr.Pervaiz (Employee)
AET-073
Suzuki Alto 620 155 613 --do-- Mr.Abdul Khalique (Employee)
ARH-136
Suzuki Alto 530 100 346 --do-- Mr.Javed (Employee)
AQQ-564
Suzuki Liana 1,024 286 654 --do-- Mr.Abdul Ghaffar (Employee)
ASH-884
Suzuki Baleno 774 62 350 Negotiation Mr.Sanaullah Khan
AEZ-933 House#48/A, New Haji Camp, Karachi.
Toyota Corolla 1,169 82 490 --do-- Mr.Muhammad Shakeel
AFL-403 Plot# 8, Street# 3, Muslimabad, Karachi.
Toyota Corolla 1,718 1,305 1,500 Insurance M/s. EFU General Insurance
AZD-822 Claim Karachi.
Items having book value 550 190 413 Various Various
upto Rs.50 thousand each

Sub Total 14,636 4,540 9,178 -- --

Total - 2015 15,051 4,663 9,206 -- --


Total - 2014 34,436 12,273 20,731 -- --

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Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


5.4 Capital Work-in-Progress

Balance as Transfer to Balance as


at July 1, Additions Operating at June 30,
2014 fixed assets 2015
Factory building on lease hold
land under construction 3,861 1,166 (2,438) 2,589
Plant and machinery under erection 36,426 265,263 (249,362) 52,327
Factory equipment - 6,854 (2,968) 3,886
Office Equipment - 60 (60) -
40,287 273,343 (254,828) 58,802

Balance as Transfer to Balance as


at July 1, Additions Operating at June 30,
2013 fixed assets 2014
Factory building on lease hold
land under construction 1,594 4,394 (2,127) 3,861
Plant and machinery under erection 195,336 273,316 (432,226) 36,426
Factory equipment - 27,525 (27,525) -
Office Equipment - 435 (435) -
196,930 305,670 (462,313) 40,287

(Pak Rupees in Thousand)


2015 2014

6 LONG TERM INVESTMENT


Related Party

In Associated Company - Unlisted Public Limited Company


At the beginning of the year 3,780,174 3,163,411
Investment in shares made during the year - 297,000
Share of profit after income tax for the period 91,740 319,763
Dividend recognised (255,150) -
3,616,764 3,780,174

This represents value of 56.7 million (2014: 56.7 million shares) including 12 million Bonus
shares invested in an associated company namely Messrs. Novatex Limited representing 36.83%
(2014: 36.83%) of its total issued/paid up capital.

In compliance with IAS-28 "Investment in Associates and Joint Ventures", the above
investment has been valued, using equity method. The annual audit of associate's accounts as
on June 30, 2015, has been still in progress, at the time, when Board of Directors of the Parent
Company approved the consolidated accounts of the Group. Upon request of the Parent
Company, the associate company has communicated its unaudited financial results, as on
March 31, 2015 for the purpose of application of equity method, accordingly the share of profit
of associate is based on unaudited result. The accumulated addition of Rs.3,049.764 million
(March 2014 : Rs.3,213.174 million), to the Parent Company's unappropriated profit, is not
available for distribution, to the shareholders of the Parent Company, until realised.

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(Pak Rupees in Thousand)


2015 2014

7 LONG TERM LOANS - Considered good


Secured - Interest free

To employees other than Chief Executive & Directors 7,720 4,142


Amount due in twelve months shown under current assets (6,916) (3,931)
Recoverable within three years 804 211

7.1 The above loans are under the terms of employment and are secured against the post
employment benefits of the employees.

7.2 It includes loans to executives and its reconciliation is here under:

Balance at beginning - 308


Disbursements during the year 4,500 74
Recoveries during the year (1,371) (382)
Balance at end 3,129 -

7.2.1 The maximum aggregate amount of loan due from executives at any month end
during the year was Rs.3.860 million (2014: Rs.0.336 million).

8 LONG TERM DEPOSITS

Security deposits for utilities and others 1,669 1,671

9 STORES, SPARE PARTS AND LOOSE TOOLS

In hand:

Stores 133,639 157,442


Spare parts 483,749 468,624
Loose tools 5,292 3,441
622,680 629,507
Provision for slow moving stores, spare
parts and loose tools 9.1 (29,204) (16,909)
593,476 612,598
In transit 5,424 54,047
598,900 666,645

9.1 Provision for slow moving stores,


spare parts and loose tools
Balance at beginning 16,909 14,212
Charge for the year 12,305 3,078
Reversals due to consumption (10) (381)
12,295 2,697
Balance at end 29,204 16,909

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Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

10 STOCK IN TRADE

Raw material 540,006 714,877


Raw material in transit 20,686 5,923
Goods in process 779,088 628,472
Finished goods 1,170,397 966,009
2,510,177 2,315,281

These include raw material costing Rs.364.285 million (2014: Nil) valued at net realisable value
of Rs.338.785 million (2014: Nil), goods in process costing Rs.787.389 million (2014: Rs.403.373
million) valued at net realisable value of Rs.733.236 million (2014: Rs.392.523 million) and
finished goods costing Rs.1,073.267 million (2014: Rs.816.457 million) valued at net realisable
value of Rs.960.366 million (2014: Rs.759.728 million).

11 TRADE DEBTS

Considered good
Secured
Local 51,274 81,697
Export 86,388 74,432
11.1 137,662 156,129
Unsecured 630,051 932,636
767,713 1,088,765
Considered doubtful
Unsecured 67,975 60,446
Provision for doubtful debts 11.2 (67,975) (60,446)
- -
767,713 1,088,765

11.1 These are secured against letters of credit issued by banks in favour of the Parent Company.

11.2 Provision for doubtful debts


Balance at beginning 60,446 24,963
Charge for the year 37,829 58,843
Reversals since recovered (29,730) (22,714)
8,099 36,129
Write offs (570) (646)
Balance at end 67,975 60,446

12 LOANS AND ADVANCES - Considered good

Secured
Amount recoverable in twelve months from
employees and executives 7 6,916 3,931
Advances to employees 12.1 651 390
7,567 4,321
Unsecured
Advances :
to suppliers and contractors 12.2 31,204 30,052
for imports 7,355 3,615
38,559 33,667
46,126 37,988

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GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

12.1 These represent advances against monthly salaries under terms of employment.

12.2 These include advances against purchase of vehicles amounting to Rs.3.969 million (2014:
Rs.4.731 million).

13 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS

Shipping guarantees - deposit 8,487 -


Security deposits 220 3,796
Prepayments 13.1 3,490 105,684
12,197 109,480

13.1 These include prepayments to a related party i.e. Messrs. Novatex Limited of Rs.Nil
(2014: Rs.11.223 million) being the amount of advance rent.

14 OTHER RECEIVABLES - Considered good

Receivable from suppliers 14.1 26,371 168,259


Claims receivable from suppliers 3,317 729
Claim receivable from Insurance Companies - 3,411
Sales tax 137,242 39,449
Others 1,250 1,182
168,180 213,030

14.1 These include balances of US$ 0.112 million (2014: US$ 1.707 million).

15 TAXES REFUND DUE FROM FEDERAL


GOVERNMENT

Income tax 181,536 102,202


Sales tax 16,508 188
198,044 102,390

16 CASH AND BANK BALANCES

Cash :
In hand 1,745 1,793
At banks in current accounts : Local currency 16.1 88,720 451,648
Foreign currency 16.2 963 767
91,428 454,208

16.1 These Includes Rs.2.310 million (2014: Rs.2.115 million) received from contractors as
security deposit.

16.2 These represent balances of US$ 8,226.46 and Euro 1,129.98 (2014 : US$ 6,236.92 and
Euro 1,129.98).

Page 96
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

17 SHARE CAPITAL

17.1 Authorised capital


44,000,000 Ordinary shares of Rs. 10 each 440,000 440,000

17.2 Issued, subscribed and paid up capital


30,136,080 Ordinary shares of Rs.10/-each allotted
for consideration paid in cash 301,361 301,361
8,228,400 Ordinary shares of Rs.10/-each allotted
as fully paid bonus shares 82,284 82,284
38,364,480 383,645 383,645

These include 1,620,387 (2014 : 1,620,387) shares held by an associated company, Messrs.
Gani & Tayub (Private) Limited.

18 CAPITAL RESERVES

Share premium 18.1 383,645 383,645


Others 18.2 75,000 75,000
458,645 458,645

18.1 This represents premium of Rs. 20 per share received on initial public issue of 17,438,400
shares in 1992 and premium of Rs.10 per share received on right issue of 3,487,680 shares
in 1998. This reserve can be utilised by the Parent Company only for the purposes specified
in section 83(2) of the Companies Ordinance, 1984.

18.2 This represents reserve for replacement of plant and machinery.

19 GENERAL RESERVE 2,785,000 2,785,000

This represents reserve created from accumulation of past years' profit, to meet future exigencies.

20 DEFERRED LIABILITIES

Income tax-net 20.1 541,875 219,406


Defined benefit plan 20.2 244,510 181,446
786,385 400,852

20.1 This comprises of the following major timing differences:

Deferred tax liability arising in respect of accelerated


tax depreciation allowances 190,880 244,431
Deferred tax liability arising in respect of unrealised
accumulated profit from associates 381,221 -
Deferred tax asset arising in respect of :
Provision for doubtful debts (21,752) (19,947)
Provision for slow moving stores, spare parts
and loose tools (8,474) (5,078)
541,875 219,406

At the balance sheet date, deferred tax asset amounting to Rs.167.790 million has not been
recognised by the Parent Company considering that it is not probable that sufficient
taxable profit will be available in future.

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GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

20.2 Actuarial valuation of the plan is carried out as at June 30, 2015. The calculation for
provision of defined benefit plan is as under:-

Movement of the liability recognised in the balance sheet


Balance at beginning 181,446 149,608
Expense 20.2.1 40,683 25,114
Remeasurement: actuarial losses on obligation 28,060 11,307
Payment (5,679) (4,583)
Balance at end 244,510 181,446

20.2.1 Expense
Service cost 17,018 8,173
Interest cost 23,665 16,941
40,683 25,114

% %
The principal actuarial assumptions used were as follows:
Discount rate 9.75% 13.25%
Future salary increase rate - long term 8.75% 11.25%
Withdrawal Rate Moderate Moderate
Mortality Adjusted SLIC Adjusted SLIC
2001 - 2005 2001 - 2005
Sensitivity Analysis
PVDBO Percentage
(Pak Rupees in Change
Thousand)
Current Liability 244,510 -
+ 1% Discount Rate 233,179 -4.63%
- 1% Discount Rate 257,454 5.29%
+ 1% Salary Increase Rate 258,021 5.53%
- 1% Salary Increase Rate 232,488 -4.92%
+ 10% Withdrawal Rates 244,532 0.01%
- 10% Withdrawal Rates 244,491 -0.01%
1 Year Mortality age set back 244,762 0.10%
1 Year Mortality age set forward 244,271 -0.10%

21 TRADE AND OTHER PAYABLES

Trade creditors 481,838 354,285


Bills payable 384,315 481,580
Accrued expenses 21.1 187,526 281,266
Advance payments from customers 286,987 250,106
Creditors for capital expenditures 82 55
Security deposits from contractors 21.2 2,310 2,115
Workers' Welfare Fund 21.3 59,266 47,133
Infrastructure Cess on imports 21.4 87,137 74,613
Unclaimed dividend 40,666 10,146
Withholding taxes 7,641 7,331
Payable to Provident Fund Trusts 3,113 2,946
Other liabilities 21.5 34,745 31,983
1,575,626 1,543,559

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Annual Report of Gatron (Industries) Limited 2015

21.1 These include Rs.4.476 million (2014: 2.357 million) and Rs.0.349 million (2014: Rs.0.409
million) payable to related parties i.e. Messrs. Novatex Limited and Messrs. Gani & Tayub
(Private) Limited respectively.

21.2 This represents deposits from contractors held in separate bank account.

21.3 Workers' Welfare Fund

The Subsidiary Company i.e. Gatro Power (Private) Limited, owing to numerous,
constitutional, legal and other reasons, is fully confident and has unflinching conviction,
that Workers' Welfare Fund is not payable by the Subsidiary Company, since 2008-09
and intends impugning the charge, in the court of law with utmost vehemence. The
provision amounting to Rs.52.546 million (2014: Rs.41.615 million) is being carried only
as an abundant precaution and does not signify acceptance, by the Subsidiary Company,
of the aforesaid Workers' Welfare Fund liability.

(Pak Rupees in Thousand)


2015 2014

21.4 Infrastructure Cess on imports

Balance at beginning 74,613 59,885


Provision made during the year 26,568 27,937
Payment made during the year (14,044) (13,209)
Balance at end 87,137 74,613

The Parent Company had filed a petition in the Honorable High Court of Sindh at
Karachi challenging the levy of Infrastructure Cess on imports. The Divisional Bench
announced Judgment adjudicating the levy collected upto December 27, 2006 as invalid
and collection thereafter as valid. The Parent Company and the respondent filed appeals
before the Supreme Court of Pakistan challenging the partial judgment of the Honorable
High Court of Sindh.

In due course of time, the Government of Sindh withdrew its petition from the Supreme
Court. Later on the Supreme Court vide its order dated May 20, 2011 set aside the order
passed by the High Court of Sindh. Consequently a new petition was filed by the Parent
Company in the High Court of Sindh. Through an interim order dated May 31, 2011,
the High Court of Sindh ordered to pay 50% in cash of this liability effective from
December 28, 2006 and to submit bank guarantee for the rest of 50% until the final order
is passed. Till balance sheet date, the Parent Company has provided bank guarantee
amounting to Rs.89.865 million (2014: Rs.74.865 million) in favour of Excise and Taxation
Department, in respect of consignments cleared after December 27, 2006. Based on the
legal advise, the management believes that the case will be decided in favour of the Parent
Company. However, full provision after December 27, 2006 has been made in the accounts
as an abundant precaution.

21.5 These include Rs. 26.198 million (2014: Rs.24.467 million) received from employees under
car policy.

Page 99
GATRON

(Pak Rupees in Thousand)


2015 2014

22 ACCRUED MARK UP

Mark up on short term borrowings 16,789 25,880

23 SHORT TERM BORROWINGS - Secured


From banking companies under mark up arrangements

Running finance 625,512 1,287,334


Finance under F.E. Circular No.25 of SBP-Foreign currency 137,367 -
Export re-finance - 100,000
762,879 1,387,334

23.1 The Parent Company has aggregate facilities of short term borrowings amounting to
Rs.4,605 million (2014: Rs.4,555 million) from various commercial banks (as listed in Note
23.3) out of which Rs.3,901 million (2014: Rs.3,387 million) remained unutilised at the
year end. The Parent Company also has Rs.1,000 million (2014: Rs.325 million) swinging
facility with an Associate Company, out of which Rs.59 million (2014: Rs.219 million)
utilized by the Parent Company at the year end. The mark up rates for running finance
ranged between Rs.0.2573 to Rs.0.3008 per Rs.1000/- per day. Finance under F.E. Circular
No.25 of SBP represents US$ 1.351 million (2014: Nil) and repayable in foreign currency.
The rate of mark up on Finance obtained under F.E. Circular No.25 of SBP is 2% per
annum. These facilities are renewable annually at respective maturities.

23.2 These arrangements are secured against pari passu hypothecation charge on the stock and
book debts of the Parent Company.

23.3 The finances have been obtained or are available from Bank Al-Falah Limited, Bank Al-
Habib Limited, Dubai Islamic Bank Limited, Faysal Bank Limited, Habib Bank Limited,
Habib Metropolitan Bank Limited, JS Bank Limited, MCB Bank Limited, Meezan Bank
Limited, National Bank of Pakistan, NIB Bank Limited, Samba Bank Limited, Standard
Chartered Bank (Pakistan) Limited and United Bank Limited.

24 PROVISION FOR INCOME TAX LESS PAYMENTS

Balance at beginning 27,736 (44,407)


Provision for the year - Current 89,392 74,285
Prior (59,451) -
29,941 74,285
57,677 29,878
Payments during the year (73,944) (52,334)
Adjustments for the year 79,334 50,192
Balance at end 63,067 27,736

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Annual Report of Gatron (Industries) Limited 2015

25 CONTINGENCIES AND COMMITMENTS

25.1 Contingencies

a) The Parent Company makes provision for Workers Profit Participation Fund, based
on the managements considered view that the law on workers participation in
profits, necessitates participation of the workers, in the manner laid down in the law,
from net profit [from which all the expenses, including cesses, levies and taxes, are
fully deducted] and which is available for participation and attributable to workers
role which may be subject to interpretation by the relevant authority. The quantum
of the differential amount upto June 30, 2015 involved is Rs.27.623 million (2014:
Rs.27.623 million) and no provision for that amount is considered in the financial
statements as the management is confident that no further liability will arise on this
account. Accordingly, the Parent Company has discharged its liability on the basis
of management considered view and so far no negative inference has been communicated
to the Parent Company.

b) The Subsidiary Company i.e. Gatro Power (Private) Limited has not made any
provision in respect of Workers' Profit Participation Fund on the ground that there
are no workers as defined in The Companies Profits (Workers' Participation) Act,
1968 and accordingly the said Act does not apply to the Subsidiary Company. The
Subsidiary Company is confident that no liability will arise on this account.

c) FBR initiated action against few buyers of Parent Company for violating/non
compliance of the provisions of SRO 1125 dated December 31, 2011 and alleging the
Parent Company to provide them assistance and illegal facilitation. The dispute
relates to the period of time when supplies were zero rated and as a result of which
the Parent Company had to pay Rs.27.762 million and had also to submit post-dated
cheques of Rs. 83.287 million under protest in favour of Chief Commissioner Inland
Revenue.

The Parent Company has, however, challenged the action before the Honorable
High Court of Sindh. Realizing the facts of the case, circumstances and legal position,
the Honorable High Court of Sindh has granted interim relief whereby encashment
of above mentioned post dated cheques has been restrained.

By way of abundant precaution, the amount of Rs. 27.762 million has been charged
to profit and loss account in last year. Based on the merits of the case and discussion
held with the legal counsel, the management is confident that the case will be decided
in favour of the Parent Company. Accordingly no provision has been made for the
amount of post dated cheques of Rs.83.287 million.

d) The Government of Pakistan, through Finance Act 2012, by an amendment in


Second Schedule of The Gas Infrastructure Cess Act 2011, increased the Gas
Infrastructure Development Cess (GIDC) from July-2012 from Rs.13 to Rs.100 per
MMBTU. This was subsequently reduced by the Government to Rs.50 per MMBTU
from September-2012. The Group alongwith several other companies filed suit in
the Sindh High Court challenging the increase in GIDC. The Sindh High Court has
been pleased to stay recovery of the enhanced GIDC and hence the Group has not
paid the enhanced GIDC. Additionally, the Government through Finance Act 2014,
by promulgating the Gas Development Infrastructure Cess Ordinance 2014, has
increased the amount of GIDC for both captive power and industrial consumption
to Rs.200 & Rs.150 per MMBTU respectively. This time also the Group alongwith
several other companies has filed a suit in the Sindh High Court, challenging the
increase in GIDC and Sindh High Court granted stay accordingly.

Page 101
GATRON

On May 22, 2015 the Gas Infrastructure Development Cess (GIDC) Act, 2015 was
promulgated whereby GIDC rates of Rs. 100 per MMBTU and Rs. 200 per MMBTU
were fixed for industrial and captive power consumers, respectively. The GIDC Act,
2015 was made applicable with immediate effect superseding the GIDC Act, 2011
and GIDC Ordinance, 2014. The matter regarding levy of the GIDC prior to
promulgation of the GIDC Act, 2015 is presently indeterminate and subjudice. The
Group along with several other companies filed suit in the Honorable Sindh High
Court challenging the increase in GIDC through the GIDC Act, 2011, the GIDC
Ordinance, 2014 and the GIDC Act, 2015. The Honorable Sindh High Court has
issued stay against recovery of the GIDC under the GIDC Act, 2011, the GIDC
Ordinance, 2014 and the GIDC Act, 2015, hence the Group has not paid GIDC
under the above referred laws.
Considering previous decision of Honorable Supreme Court and legal advisor opinion,
the Group is confident that amount of the enhanced GIDC on industrial consumers,
from July 2012 to June 2014 amounting to Rs.177.611 million will no more be payable
so the same has been reversed in these financial statements as referred in note 31.
Further, as the Group is confident that the case will be decided in favor of the
Appellants, total amount of enhanced GIDC upto June 30, 2015 worked out at
Rs.450.546 million (2014: Rs.177.611 million), however Group has provided Rs.247.357
million pertaining to the period of July 2014 to June 2015 for Captive Power and
June 2015 for Industrial as an abundant precaution and remaining amount of
Rs. 203.189 million has not been provided in these financial statements, in view of
reason stated above.
25.2 Guarantees
Bank guarantees and Letters of Credit issued by the banks on behalf of the Group
in favour of:

(Pak Rupees in Thousand)


Note 2015 2014
The Director Excise & Taxation, Karachi 89,865 74,865
The Electric Inspector, President Licencing Board, Quetta 10 10
Sui Southern Gas Company for Gas - Letters of Credit 161,937 161,937
251,812 236,812
25.3 Commitments
The Group's commitments, against which the banks have opened Letters of Credit,
in favor of different suppliers, are as follows:
Foreign currency:
Property, plant and equipment 236,834 104,555
Raw material 176,935 243,838
Spare parts and others 80,403 44,362
494,172 392,755
Local currency:
Raw material - 101,183
494,172 493,938
26 SALES
Gross local sales 10,483,210 12,100,068
Third party processing charges 76,318 54,995
10,559,528 12,155,063
Less: Sales tax 26.1 900,505 948,836
Local sales 9,659,023 11,206,227
Export sales 339,583 296,229
9,998,606 11,502,456
26.1 These include local reduced rate supplies.

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Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

27 COST OF SALES

Raw material consumed 6,969,154 7,558,228


Stores, spare parts and loose tools consumed 223,401 219,028
Outsource processing charges 240,071 159,127
Salaries, wages, allowances and benefits 27.1 842,406 751,598
Power, fuel and gas 948,618 909,599
Rent, rates and taxes 2,925 2,632
Insurance 45,676 41,905
Cartage & Transportation 107,261 112,111
Repairs and maintenance 112,349 162,233
Communications & Computer expenses 1,760 1,603
Water supply 33,209 12,181
Travelling 2,254 2,479
Legal & professional fees 3,049 4,640
Sundry 42,041 50,110
Depreciation 5.2 360,643 318,007
9,934,817 10,305,481
Duty draw back (152) (129)
Scrap sales 27.2 (26,936) (17,064)
9,907,729 10,288,288
Opening stock of goods-in-process 628,472 747,624
Closing stock of goods-in-process (779,088) (628,472)
Cost of goods manufactured 9,757,113 10,407,440
Opening stock of finished goods 966,009 1,105,595
Closing stock of finished goods (1,170,397) (966,009)
9,552,725 10,547,026

27.1 These include Rs.16.608 million (2014 : Rs.14.581 million) and Rs.13.118 million (2014:
Rs.9.153 million) representing contribution to defined contribution plan by the Group
and expenditure on defined benefit plan respectively.

27.2 Net off sales tax amounting to Rs.1.373 million (2014: Rs.2.396 million)

28 DISTRIBUTION AND SELLING EXPENSES

Salaries, allowances and benefits 28.1 35,421 29,930


Insurance 3,989 3,866
Rent, rates and taxes 624 990
Handling, freight and transportation 182,167 168,869
Advertisement and sales promotion 844 914
Communications 291 263
Travelling 1,319 1,114
Fee & subscriptions 426 366
Sundry 8,276 30,885
Depreciation 5.2 943 1,051
234,300 238,248

Page 103
GATRON

28.1 These include Rs.0.827 million (2014 : Rs.0.827 million) and Rs.5.407 million (2014 :
Rs.3.887 million) representing contribution to defined contribution plan by the Group
and expenditure on defined benefit plan respectively.

(Pak Rupees in Thousand)


Notes 2015 2014

29 ADMINISTRATIVE EXPENSES

Salaries, allowances and benefits 29.1 165,988 133,123


Rent, rates and taxes 45,240 45,246
Insurance 1,412 1,272
Repairs and maintenance 10,695 8,665
Travelling 5,554 5,303
Communications 3,073 2,407
Legal & professional fees 4,765 16,562
Utilities 8,800 6,429
Printing and stationery 2,322 2,278
Transportation 3,767 3,899
Sundry 11,787 6,278
Depreciation 5.2 6,801 6,333
270,204 237,795

29.1 These include Rs.4.829 million (2014 : Rs.4.710 million) and Rs.22.158 million (2014 :
Rs.12.074 million) representing contribution to defined contribution plan by the Group
and expenditure on defined benefit plan respectively.

30 OTHER OPERATING EXPENSES

Loss on disposal of property, plant and equipment 102 99


Provision for doubtful trade debts - net 11.2 8,099 36,129
Provision for slow moving stores, spare parts
and loose tools - net 9.1 12,295 2,697
Exchange loss - net 7,827 -
Corporate social responsibilities 30.1 14,442 21,434
Workers' Welfare Fund 12,133 13,288
Auditors' remuneration 30.2 1,395 1,267
56,293 74,914

30.1 These include donation of Rs.10.850 million (2014: Rs. 8.546 million) to Messrs. Gatron
Foundation in which Chief Executive and six directors of the Parent Company are
governors. None of the directors of the Parent Company or their spouses has any interest
in any donee fund, in so far as other donations are concerned.

Page 104
Annual Report of Gatron (Industries) Limited 2015

(Pak Rupees in Thousand)


Notes 2015 2014

30.2 Auditors' remuneration


Audit fee - Annual accounts 1,123 1,146
Limited review, audit of consolidated financial
statements, winding up financial statements of
Subsidiary Company,
Provident funds and certification fee 115 63
Sindh sales tax on services 73 -
Out of pocket expenses 84 58
1,395 1,267

31 OTHER INCOME

Income from non -financial assets


Gain on disposal of property, plant and equipment 4,645 8,557

Others
Liabilities no more payable written back 3,630 3,457
Reversal of provision for Gas Infrastructure
Development Cess 177,611 -
Insurance claim received 24,422 -
Exchange gain - net - 2,209
Miscellaneous income 242 229
205,905 5,895
210,550 14,452

32 FINANCE COST

Mark up on short term borrowings 103,283 116,743


Bank charges 2,032 2,223
105,315 118,966

33 INCOME TAX

For the current year 89,392 74,285


For the prior year (59,451) -
29,941 74,285
Deferred 33.1 322,469 (57,237)
352,410 17,048

33.1 It includes amounting to Rs.381.221 million pertains to deferred tax provided during the
year on un-realized share of profit in associate company, refer note 4.10.

Page 105
GATRON

(Pak Rupees in Thousand)


Notes 2015 2014

Relationship between income tax and profit before income tax :

Profit before income tax 83,345 619,450

Income tax rate 33% 34%

Income tax on profit before income tax 27,504 210,613

Tax effect of:


minimum tax 99,357 114,675
tax credits (39,066) (43,294)
income assessed under final tax regime (781) (3,547)
change in statutory tax rate for next year (5,021) (6,649)
others 134,187 (22,760)
prior year reversal for income tax (59,451) -
deferred tax effect on un-realised share of
profit in associate company 381,221 -
income exempt from subsidiary (180,368) (123,387)
loss from subsidiaries 12 24
dividend income and share of profit in associate company (5,184) (108,627)
Income tax for the year 352,410 17,048

34 EARNINGS PER SHARE - BASIC AND DILUTED

(Loss) / profit after income tax (269,065) 602,402

( Number of Shares )

Number of Ordinary shares 38,364,480 38,364,480

Rupees Rupees

(Loss) / earnings per share - Basic and diluted (7.01) 15.70

There is no dilutive effect on the basic earnings per share of the Group.

35 CASH AND CASH EQUIVALENTS

Cash and bank balances 16 91,428 454,208


Short term borrowings 23 (762,879) (1,387,334)
(671,451) (933,126)

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Annual Report of Gatron (Industries) Limited 2015

36 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

FINANCIAL ASSETS AND LIABILITIES

(Pak Rupees in Thousand)


Interest/mark-up bearing Non-Interest/mark-up bearing

Maturity Maturity Maturity Maturity 2015 2014


Sub Sub Total Total
upto after one upto after one
Total Total
one year year one year year

Financial Assets
Long term investment - - - - 3,616,764 3,616,764 3,616,764 3,780,174
Loans and advances - - - 7,567 804 8,371 8,371 4,532
Deposits - - - 8,707 1,669 10,376 10,376 5,467
Trade debts - - - 767,713 - 767,713 767,713 1,088,765
Other receivables - - - 27,621 - 27,621 27,621 173,581
Cash and bank balances - - - 91,428 - 91,428 91,428 454,208
- - - 903,036 3,619,237 4,522,273 4,522,273 5,506,727
Financial Liabilities
Trade and other payables - - - 1,134,595 - 1,134,595 1,134,595 1,164,376
Accrued mark up - - - 16,789 - 16,789 16,789 25,880
Short term borrowings 762,879 - 762,879 - - - 762,879 1,387,334
762,879 - 762,879 1,151,384 - 1,151,384 1,914,263 2,577,590

The effective interest/markup rates for the monetary financial assets and liabilities are mentioned
in respective notes to the financial statements.

36.1 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying value of all financial assets and liabilities reflected in the financial statements
approximate at their fair value.

36.2 FINANCIAL RISK MANAGEMENT OBJECTIVES

The Group exposed to a variety of financial risks: market risk (including currency risk,
interest rate risk and other price risk), credit risk and liquidity risk. The Group's overall
risk management programme focusses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on the financial performance.

Risk Management is carried out under policies and principles approved by the Board.
All treasury related transactions are carried out within the parameters of these policies
and principles.

Page 107
GATRON

A Market Risk

i Foreign exchange risk

Foreign exchange risk represents the risk that the fair value of future cash flows of a
financial instruments will fluctuate because of changes in foreign exchange rates. Foreign
exchange risks arises mainly from future economic transactions or receivables and payables
that exist due to transactions in foreign currencies.

The Group is exposed to foreign exchange risk arising from currency value fluctuations,
primarily with respect to the USD, Euro, AED, JPY and CHF. The Group's exposure
to foreign currency risk is as follows:

(Pak Rupees in Thousand)


2015 2014
Bills Payable 384,315 481,580
Finance under F.E. Circular No.25 of SBP 137,367 -
521,682 481,580

Trade Debts (86,388) (74,432)


Receivable from suppliers (11,394) (168,259)
Foreign currency bank accounts (963) (767)
(98,745) (243,458)
422,937 238,122
Commitments - Outstanding letters of credit 494,172 392,755
Net exposure 917,109 630,877

The following significant exchange rates have been applied


Average rate Reporting date rate
2015 2014 2015 2014
Rupees
USD to PKR 101.21 102.90 101.70 98.75
Euro to PKR 121.39 139.93 113.79 134.73
AED to PKR 27.51 28.02 27.64 26.89
JPY to PKR 0.93 1.02 0.83 0.97
CHF to PKR - 114.24 - 110.82
At reporting date, if the PKR had strengthened/weakened by 10% against the USD, Euro,
AED, JPY and CHF with all other variables held constant, pre tax profit for the year
would have been higher/lower by the amount shown below, mainly as a result of net
foreign exchange gain or net foreign currency exposure at reporting date.
Average rate Reporting date rate
2015 2014 2015 2014
(Pak Rupees in Thousand)
Effect on profit & loss account
USD to PKR 72,922 53,198 73,279 51,095
Euro to PKR 26,185 13,261 24,545 12,768
AED to PKR (6,260) (2,361) (6,290) (2,261)
JPY to PKR 198 346 176 331
CHF to PKR - 1,189 - 1,154
93,045 65,633 91,710 63,087

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for
the year and assets / liabilities of the Group.

Page 108
Annual Report of Gatron (Industries) Limited 2015

ii Price risk

Price risk represents the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices (other than those arising from interest
or currency rate risk), whether those changes are caused by factors specific to the individual
financial instrument or its issuer, or factors affecting all similar financial instruments
traded in the market.

The Group is not exposed to equity price risk since there are no investment in listed
equity securities.

iii Interest / Markup rate risk

Interest / Markup rate risk arises from the possibility of changes in Interest / Markup
rates which may effect the value of financial instruments. The Parent Company has short
term borrowings at variable rates. At the balance sheet date the interest profile of the
Group's interest-bearing financial instrument is:

(Pak Rupees in Thousand)


2015 2014 2015 2014
Effective rate (in %) Carrying amount
Financial Liabilities
Variable rate instruments
Short term borrowings 5.99 - 10.37 8.77 - 10.46 762,879 1,387,334

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have
decreased / (increased) profit for the year by the amounts shown below. This analysis
assumes that all other variable, in particular foreign currency rates, remain constant. This
analysis is performed on the same basis for 2014.

Profit and loss


100 bp 100 bp
increase decrease
As at June 30, 2015
Cash flow sensitivity - Variable rate financial liabilities (7,629) 7,629

As at June 30, 2014


Cash flow sensitivity - Variable rate financial liabilities (13,873) 13,873

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for
the year and assets / liabilities of the Group.

B Credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date
if counter parties failed completely to perform as contracted. The Group manages credit
risk interalia by setting credit limits in relation to individual customers and by obtaining
advance against sales and also obtains collaterals, where considered necessary. Also the
Group does not have significant exposure in relation to individual customer. Consequently,
the Group believes that it is not exposed to any major concentration of credit risk.

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GATRON

Exposure to credit risk

The carrying amount of the financial assets represent the maximum credit exposure before
any credit enhancements. Out of total financial assets of Rs.4,522.273 million (2014 :
Rs.5,506.727 million), the financial assets which are subject to credit risk amounted to
Rs.903.764 million (2014: Rs.1,724.760 million). The carrying amounts of financial assets
exposed to credit risk at reporting date are as under:

(Pak Rupees in Thousand)


2015 2014
Loans and advances 8,371 4,532
Deposits 10,376 5,467

Trade debts 767,713 1,088,765


Other receivables 27,621 173,581
795,334 1,262,346
Bank balances 89,683 452,415
903,764 1,724,760

The aging of trade debts and other receivables at the reporting date

Not past due 544,254 894,792


Past due 1-30 days 71,010 75,418
Past due 31-90 days 140,485 165,625
Past due 91-180 days 34,967 69,315
Past due 180 days 72,593 117,642
863,309 1,322,792
Provision for doubtful debts (67,975) (60,446)
795,334 1,262,346

The credit quality of Group's bank balances can be assessed with reference to external
credit rating as follows:

Rating Rating
Bank Agency Short term Long term

Bank Al-Falah Limited PACRA A1+ AA


Bank Al-Habib Limited PACRA A1+ AA+
Dubai Islamic Bank Pakistan Limited JCR-VIS A-1 A+
Faysal Bank Limited PACRA A1+ AA
Habib Bank Limited JCR-VIS A-1+ AAA
Habib Metropolitan Bank Limited PACRA A1+ AA+
JS Bank Limited PACRA A1+ A+
MCB Bank Limited PACRA A1+ AAA
Meezan Bank Limited JCR-VIS A-1+ AA
National Bank of Pakistan PACRA A1+ AAA
NIB Bank Limited PACRA A1+ AA-
Samba Bank Limited JCR-VIS A-1 AA
Standard Chartered Bank (Pakistan) Limited PACRA A1+ AAA
United Bank Limited JCR-VIS A-1+ AA+

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Annual Report of Gatron (Industries) Limited 2015

C Liquidity risk

Liquidity risk represents where an entity will encounter difficulty in meeting obligations
associated with financial liabilities.

The Group manages liquidity risk by maintaining sufficient cash and ensuring the fund
availability through adequate credit facilities. At June 30, 2015, the Parent Company has
Rs.4,605 million plus Rs.1,000 million swinging facility with Associate Company, available
borrowing limit from financial institutions. The Group has unutilised borrowing facilities
of Rs. 3,901 million in addition to balances at banks of Rs.90 million. Based on the above,
management believes the liquidity risk to be insignificant. The following are the contractual
maturities of financial liabilities, including interest/mark-up payments.

Carrying Contractual Six months Beyond six


Amount Cash Flow or less months
----------------------------- (Pak Rupees in Thousand) ----------------------------
2015
Trade and other payables 1,134,595 1,134,595 1,134,595 -
Accrued mark up 16,789 16,789 16,789 -
Short term borrowings 762,879 763,337 763,337 -
1,914,263 1,914,721 1,914,721 -

2014
Trade and other payables 1,164,376 1,164,376 1,164,376 -
Accrued mark up 25,880 25,880 25,880 -
Short term borrowings 1,387,334 1,387,334 1,387,334 -
2,577,590 2,577,590 2,577,590 -

36.3 CAPITAL RISK MANAGEMENT

The Group's objectives in managing capital is to ensure the Group's ability to continue
as a going concern so that it can continue to provide returns to shareholders and benefit
for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital.

The gearing ratio as at June 30, 2015 and 2014 were as follows:

(Pak Rupees in Thousand)


2015 2014

Total borrowings 762,879 1,387,334


Cash and bank (91,428) (454,208)
Net debt 671,451 933,126
Total equity 7,158,264 7,648,497
Total capital 7,829,715 8,581,623

Gearing ratio 9% 11%

The ratio is calculated as net debt divided by total capital. Net debt is calculated as total
borrowings less cash and bank balances. Total capital is calculated as 'equity' as shown
in the consolidated balance sheet plus net debt.

The Group finances its operations through equity, borrowings and management of
working capital with a view to maintaining an appropriate mix amongst various sources
of finance to minimize risk and cost.

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GATRON

37 REMUNERATION OF CHIEF EXECUTIVE,


DIRECTORS AND EXECUTIVES

The aggregate amount charged to profit and loss account for remuneration, including all benefits
to the Chief Executive, Directors and Executives of the Group are as follows:
(Pak Rupees in Thousand)
Chairman Chief Executive Directors Executives TOTAL
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Managerial
remuneration 10,016 - 15,558 14,189 21,780 24,597 121,466 99,255 168,820 138,041

Post Employment
benefits - - 5,088 4,488 6,295 5,885 23,084 15,218 34,467 25,591

Utilities - - 99 88 68 152 34 31 201 271

Other benefits - - - - 2,245 2,166 57,813 49,548 60,058 51,714

10,016 - 20,745 18,765 30,388 32,800 202,397 164,052 263,546 215,617

Number of persons

for remuneration 1 - 1 1 3 4 78 67 83 72

37.1 Aggregate amount of meeting fee to Chairman and 3 non-executive Directors (2014: 3
non-executive Directors) was Rs.90 thousand (2014: Rs.85 thousand).

37.2 In addition, the Chief Executive and working directors are provided with Company
maintained car and certain executives are provided with household furniture and cars
under Company policies, the monetary impact where of is not quantifiable.

37.3 An Associated Company reimbursed Rs.28.092 million (2014: Rs.22.024 million) in respect
of services provided by certain directors and executives during the year.

38 SEGMENT REPORTING

38.1 Reportable segments

The Group's reportable segments are as follows:

- Polyester Filament Yarn - it comprises manufacturing of Polyester Filament Yarn


and its raw material.

- Polyester PET Preform - it comprises manufacturing of Polyester PET Preform and


its raw material. This includes the results of Messrs. Global Synthetics Limited,
which has not yet commenced its operations till date.

- Electric Power generation- it comprises operations of Gatro Power (Pvt) Limited.

Other operating expenses, other income, finance cost, and taxation are managed at Group
level.

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Annual Report of Gatron (Industries) Limited 2015

38.2 Segment results:

The segment information for the reportable segments for the year ended June 30, 2015 is as
follows:
(Pak Rupees in Thousand)
June 2015 June 2014
Polyester Polyester Polyester Power Group Polyester Polyester Polyester Power Group
Filament PET Polymer Generation Filament PET Polymer Generation
Yarn Preform Yarn Preform

Sales 7,372,281 2,903,000 10,275,281 1,627,502 11,902,783 8,729,689 3,034,010 11,763,699 1,536,722 13,300,421
Segment result (557,416) 91,237 (466,179) 407,111 (59,068) (84,615) 190,435 105,820 373,122 478,942

Reconciliation of segment sales & results with sales & (loss)/profit before income tax:

Total sales for reportable segments 11,902,783 13,300,421


Elimination of inter-segment sales from subsidiary (1,904,177) (1,797,965)
Sales 9,998,606 11,502,456

Total results for reportable segments (466,179) 407,111 (59,068) 105,820 373,122 478,942
Other operating expenses (44,110) (12,298) (56,408) (64,594) (10,393) (74,987)
Other income 58,828 152,167 210,995 14,303 594 14,897
Finance cost (104,904) (411) (105,315) (118,547) (419) (118,966)
Investment income - Dividend 616,350 - 616,350 225,750 - 225,750
Share of profit in associate company 93,026 319,491
59,985 546,569 699,580 162,732 362,904 845,127
Elimination of intra group transaction (616,235) (225,677)
Profit before income tax 83,345 619,450

Assets and liabilities by segments are as follows:

Segment assets 3,872,519 1,370,457 5,242,976 1,272,981 6,515,957 4,234,219 1,269,941 5,504,160 1,104,588 6,608,748
Segment liabilities 439,503 124,734 564,237 393,616 957,853 334,806 116,099 450,905 410,487 861,392

Reconciliation of segments assets and liabilities with totals in the balance sheet is as follows:

Assets Liabilities Assets Liabilities


Total for reportable segments 6,515,957 957,853 6,608,748 861,392
Unallocated assets/liabilities 5,044,902 2,841,966 4,621,155 2,564,111
Elimination of intra group balances (1,197,849) (595,073) (196,045) (40,142)
Total as per balance sheet 10,363,010 3,204,746 11,033,858 3,385,361

Other segment information is as follows:

Depreciation 218,698 75,489 294,187 74,200 368,387 198,652 75,289 273,941 51,450 325,391

Capital expenditures incurred


during the period 280,234 49,432 329,666 121,751 451,417 306,334 18,543 324,877 23,099 347,976
Unallocated capital expenditure
incurred during the period 8,599 39,814
Total 460,016 387,790

38.3 All non-current assets of the Group as at June 30, 2015 are located in Pakistan. Company's
local sales represents sales to various external customers in Pakistan whereas export sales
represents sales to customers in various countries.

38.4 The Group does not have transaction with any external customer which amount to 10
percent or more of the Group's revenue.

Page 113
GATRON

( Metric Tons )
2015 2014

39 PLANT CAPACITY AND ACTUAL PRODUCTION

39.1 Polyester Filament Yarn 39.1.1


Annual capacity 24,191 24,191
Actual production 37,028 39,434

39.2 Polyester P.E.T. Preforms 39.2.1


Annual capacity 27,606 27,606
Actual production 17,670 13,265

( KWH in Thousand )

39.3 Electric Power 39.3.1


Annual capacity 213,222 213,222
Actual production 143,908 151,959

39.1.1 The capacity is determined based on 75 denier and 24 filament. Actual production
represents production of various deniers.

39.2.1 The capacity is determined based on 39 gms 12 months production. Actual


production represents production of various grammage. The actual production
versus annual capacity is lower on account of very low preform demand/production
in winter months of the year. The actual production of preforms (various
grammage) in pieces was 571.609 million (2014: 404.890 million) against annual
capacity (based on 39 gms) of 707.858 million pieces.

39.3.1 The capacity includes capacities of standby generators.

(Pak Rupees in Thousand)


2015 2014

40 TRANSACTIONS WITH RELATED PARTIES

During the year, details of transactions with related parties are as follows:

Associated Company Purchase / sale of services 305,305 206,131


Purchase of other material 716 566
Investment in shares during the year - 297,000
Receipt of dividend 255,150 -
On account of rent 44,890 44,890
On account of reimbursement
of expenses 48,488 42,075

Other Related Parties Payment of dividend 8,102 10,533


Charges on account of handling 5,612 5,128
Payment of donation 10,850 8,546

- The above figures are exclusive of sales tax, where applicable.


- Outstanding balances, as at balance sheet date, are disclosed in their respective notes.

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Annual Report of Gatron (Industries) Limited 2015

Transactions and outstanding balances, as applicable in relation to Defined Contribution


Plan (DCP) and Key Management Personnel (KMP) have been disclosed in notes 27.1,
28.1, 29.1 of DCP; 7.2 and 37 of KMP; respectively. KMP are those persons having
authority and responsibility for planning, directing and controlling the activities of the
entity directly or indirectly. The Group considers its Chief Executive, Executive Directors
and other executives to be KMP.

(Pak Rupees in Thousand)


2015 2014

41 PROVIDENT FUND RELATED DISCLOSURES

The Following information is based on latest un-audited financial statements of the Funds.

Size of the Funds - Total Assets 366,302 322,239

Cost of Investments made 323,746 289,869

Fair Value of investments 363,170 319,269

Percentage of investments made (Fair value to size of the fund) 99.14% 99.08%

(Pak Rupees in Thousand)


2015 2014
Amount % Amount %

41.1 The Break-up of fair value of investments is:

Shares in Listed Companies 1 0.00% 1 0.00%


Government Securities 257,319 70.85% 239,530 75.03%
Debt Securities 10,448 2.88% 16,802 5.26%
Mutual Funds 51,558 14.20% 21,479 6.73%
Bank Deposits 43,844 12.07% 41,457 12.98%
363,170 100.00% 319,269 100.00%

41.2 The investments out of provident funds have been made in accordance with the provision
of Section 227 of the Companies Ordinance, 1984 and the rules formulated for this
purpose.

42 NUMBER OF EMPLOYEES

The total average number of employees during the year and as at June 30, 2015 and 2014
respectively are as follows:

(Number of employees)
2015 2014

Average number of employees during the year 1,059 1,102

Number of employees as at June 30 1,016 1,077

Page 115
GATRON

43 NON ADJUSTING EVENT AFTER BALANCE SHEET DATE

The Board of Directors of the Parent Company, in its meeting held on September 12, 2015, has
recommended final cash dividend of Rs.1.50 per share (2014: Rs.3.00 per share final cash
dividend) This is in addition to interim cash dividend of Rs.2.00 per share (2014: Rs.2.50 per
share) already paid resulting a total cash dividend for the year of Rs.3.50 per share (2014: Rs.5.50
per share). The approval of the members for the final cash dividend will be obtained in the
Annual General Meeting. Since it is a non adjusting event, the financial statements for the year
ended June 30, 2015 do not include the effect of the recommended final cash dividend.

44 CORRESPONDING FIGURES

Prior year's figures have been reclassified for the purpose of better presentation. Significant
changes made during the year are as follows:

Reclassification from Reclassification to (Pak Rupees in


component component Thousand)

Trade and other payables Trade and other payables


Other liabilities Withholding taxes 7,331
Other liabilities Payable to Provident Fund Trusts 2,946

Restatement in share of profit after tax in Associated Company

In the previous year adopting the amendment in IAS-19, the associated company has reclassified
figures of unrealized actuarial gain from Profit and Loss Account to Other Comprehensive
Income. Therefore, corresponding figure of share of profit of associated company has been
decreased by Rs. 0.272 million and Other Comprehensive Income has been increased with the
same amount. There has been no effect on Balance sheet.

45 DATE OF AUTHORISATION FOR ISSUE

These financial statements were authorised for issue on September 12, 2015 by the Board of
Directors of the Parent Company.

46 GENERAL

Figures have been rounded off to the nearest thousand of Pak Rupees.

HAJI HAROON BILWANI PEER MOHAMMAD DIWAN


Chairman Chief Executive

Page 116
Annual Report of Gatron (Industries) Limited 2015

Gatron
(Industries)
Limited

WITHHOLDING TAX ON DIVIDEND


(IN CASE OF JOINT ACCOUNT HOLDERS)

The Shareholders of the company are hereby informed that under Section 150 of the Income
Tax Ordinance, 2001 and pursuant to Finance Act, 2015 withholding tax on dividend income
will be deducted for "Filers" and "Non-Filers" shareholders @ 12.50% and 17.50% respectively.

According to Federal Board of Revenue (FBR) clarifications vide letter No.1/(54) Exp/2014-
132872-8 dated 24th September, 2014 and their subsequent letter No.C. No.1(17) WHT/2011
dated 1st December, 2014 withholding tax will be determined separately on "Filers/Non-Filers"
status of Principal shareholders as well as Joint holder(s) based on their shareholding proportions.

In this regard, all joint shareholders, are requested to provide shareholding proportions of Principal
shareholder and Joint holder(s) in respect of shares held by them to our Share Registrar in writing
as per undermentioned format:

Principal Shareholder Joint Shareholder(s)


Folio /
CDS Total Shareholding Shareholding
Account # Shares Name and CNIC # Proportion Name and CNIC # Proportion
(No. of Shares) (No. of Shares)

The above required information must reach to our Share Registrar latest by October 19,
2015, otherwise it will be assumed that the shares are equally held by Principal shareholder
and Joint holder(s) and tax will be deducted accordingly.

Shareholders are therefore, advised to please check and ensure Filer status from Active Taxpayers
List (ATL) available at FBR website http://www.fbr.gov.pk as well as ensure that their
CNIC/Passport number has been recorded by the Participant/Investor Account Services or by
Share Registrar (in case of physical shareholding).

Corporate bodies (non-individual shareholders) should ensure that their name and National Tax
Numbers (NTN) are available in ATL at FBR website and recorded by respective
Participant/Investor Account Services or in case of physical shareholding by company's Share
Registrar.

Page 117
Annual Report of Gatron (Industries) Limited 2015

Gatron
(Industries)
Limited

DIVIDEND MANDATE FORM


To:
The Share Registrar
C&K Management Associates (Private) Limited
Room No.404, 4th Floor, Trade Tower
Abdullah Haroon Road, Near Metropole Hotel,
Karachi-75530, Pakistan
OR
Broker's Name
(where shares are held in the participant's sub account)
OR
Central Depository Company of Pakistan
(where shares are held in the Investor Account Services)

1. I hereby authorize Gatron (Industries) Limited to directly credit my cash dividend declared
by it, if any, in the below mentioned bank account.

(I) Shareholder's Detail


Name of the shareholder
Folio No.
Participant ID and Sub Account No.
CDC Investor Account No.
CNIC No.*
Passport No. (in case of foreign shareholder)**
Land line phone number
Cell number

(II) Shareholder's Bank Detail


Title of the bank account
Bank Account No.
Bank's name
Branch name
Branch address

2. It is stated that the above-mentioned information is correct and that I will intimate the
changes if any in the above-mentioned information.

Signature of the Shareholder

Note:
1) The shareholder who hold shares in physical form are requested to submit the above-
mentioned Dividend Mandate Form after duly filled in and signed to Share Registrar concerned.

2) The Shareholders who hold shares in Central Depository System are requested to submit
the above-mentioned Dividend Mandate Form duly filled in and signed to their
Participant/Investor Account Services of the Central Depository Company Limited.

* Please attach attested photocopy of CNIC.


** Please attach attested photocopy of the Passport.

Page 118
Gatron
(Industries)
Limited
Proxy Form

I/We, of
being member of Gatron (Industries) Limited and holder of
Ordinary shares as per Share Register Folio No. and/or CDC
Participant ID No. and Account/Sub-Account No.
hereby appoint of as my/our proxy
to attend, speak and vote for me/us and on my/our behalf at the 35th Annual General Meeting of the
Company to be held on Monday, October 19, 2015 at 11:00 a.m., and at any adjournment thereof.

Signed this day of , 2015.


Signature
on Revenue
Witness: Stamp of Rs.5/-
1. Signature
Name
Address
CNIC No.

2. Signature
Name
Address
CNIC No.

Notes:

1. The proxy form in order to be valid must be signed across five rupees revenue stamp and should be deposited
with the company not later than 48 hours before the time of holding the meeting.

2. The proxy must be a member of the company.

3. Signature should agree with the specimen signature, registered with the company.

4. CDC shareholders and their proxies must attach either an attested photocopy of their Computerized National
Identity Card or Passport with this proxy form.
OPTION 1 (29-AUG-15)

ANNUAL REPORT
2015

GATRON (INDUSTRIES) LIMITED